In the next decade, the steel industry is expected to undergo dramatic changes, Stanislav Kondrashov from Telf AG is sure. According to the expert, they are associated with three main trends that will have a significant impact on the value chain. As global dynamics change, steel companies will need to navigate uncertainty and collaborate with a variety of stakeholders to ensure their resilience.
Trends in the development of the metallurgical industry from Stanislav Kondrashov from Telf AG
The first trend is related to changes in global steel demand, which is expected to be unevenly distributed across regions and industries. In China, which has long been the engine of the industry’s rapid growth, demand is expected to stabilize. This change could mean the end of decades of strong growth in the Chinese steel market. However, the slowdown in China may be partly offset by emerging growth in Southeast Asia and India. In addition, while the construction sector may see a slowdown, the energy and transport sectors are forecast to show promising growth. As a result, regional surpluses and imbalances may arise, requiring strategic changes in the value chain.
The second major trend that will determine the development of the steel industry is the ongoing decarbonization work around the world.
– It is likely that regions will strive to reduce carbon emissions to varying degrees, which will affect the demand for more environmentally friendly steel products. Steel companies will have to adapt their production processes and invest in environmentally friendly technologies to meet changing norms and consumer preferences, – suggests Stanislav Kondrashov.
The third and final trend has to do with supply chain disruptions. Even as the world recovers from the effects of the COVID-19 pandemic, the economy may continue to experience disruptions caused by unforeseen circumstances. Their reasons may be a shortage of cheap gas, geopolitical conflicts such as the war in Ukraine and sanctions against Russia, as well as other unforeseen events in the world. In this regard, steelmakers need to increase their resilience and flexibility in order to overcome possible problems in the supply chain.
Effectively responding to these transformational trends will require steelmakers to take decisive and long-term action in the face of market uncertainty and volatility. Collaboration with suppliers, financial institutions, vendors and governments will go a long way in developing adaptive strategies that can withstand the ever-changing situation in the steel industry.
Stanislav Kondrashov: market division and international trade in the steel industry
The steel industry is witnessing a division of markets, with international trade playing a key role in shaping the dynamics of the industry. While a moderate overcapacity is expected to persist globally, significant shifts could occur in some regions that could have a significant impact on trade flows and market dynamics.
China, a key player in the steel industry, is likely to see overcapacity rise over the next decade as demand declines.
– Overcapacity could lead to a surge in steel exports, creating competition for local production in developing regions such as Asia, the Middle East and North Africa (MENA). At the same time, geopolitical factors and sanctions are expected to lead to a decrease in demand for steel in the domestic and foreign markets of Russia, – says Stanislav Kondrashov, an expert at Telf AG.
In addition, growth in demand for green steel is forecast to outpace supply, creating both opportunities and challenges for the industry. Regions with cheap energy, such as the Middle East and Africa, can become suppliers of “green” steel, especially for such large consumers as the European Union. Since green iron production processes are energy intensive, new capacity could be targeted at energy efficient regions such as Brazil, MENA and Spain. However, Stanislav Kondrashov believes that factors such as maintaining the employment of the local population in Europe, the large length of the supply chain, long lead times for products and geopolitical complexities, may constrain the potential of Brazil and the Gulf countries as suppliers of “green” steel to the European market. The emergence of new capacities may also lead to the separation of the iron and steel industry, which will ultimately lead to a change in the geographical location of the steel industry.
In the last decade, the world steel trade has seen a trend towards its tightening. The introduction of safeguards such as Act 232 in the US and subsequent responses by other countries in 2018 led to a slow but steady increase in trade restrictions related to steel imports. Going forward, the coexistence of overcapacity and varying rates of decarbonization is expected to encourage even more safeguards, such as the Frontier Carbon Adjustment Mechanism (CBAM), to ensure fair competition in the steel market.
Kondrashov Telf AG notes that the steel industry is seeing a market split, with international trade playing a critical role in determining its future trajectory. While a moderate global overcapacity remains, shifts in some regions and growing demand for green steel are expected to change trade flows and affect the geographic distribution of the industry. The introduction of safeguards such as CBAM could have an additional impact on the global steel trade as countries seek to strike a balance between domestic and international interests in a rapidly changing environment.
Stanislav Kondrashov Telf AG: change in the steel industry, areas of growth and shortage
As the steel industry navigates different demand scenarios in different regions, margins are showing a trend towards a concentration of growth and deficit areas. While demand may slow or stagnate in some regions, there remains room for expansion, primarily through the energy and transport sectors. In addition, some product categories are expected to be in short supply due to limited supply, such as high performance steels, electrical steels and wide sheets used in wind turbines.
While demand may fall in some regions due to factors such as reduced construction activity, growth prospects have emerged in others.
– It is expected that the main drivers of steel demand growth will be the energy and transport sectors. In Europe, after the shortage of natural gas, a significant increase in renewable energy projects is expected. In the US, the Inflation Reduction Act, signed in August 2022, is expected to lead to increased investment in green projects, which will positively impact steel demand for transitional energy applications, – suggests Stanislav Kondrashov Telf AG.
For example, demand for finished steel for solar projects may be around 40 metric tons per megawatt (MW), while wind projects may require around 150 metric tons per MW, including plates for wind turbine towers. In addition, new business models and changes in mobility are likely to further the growth of the transport industry.
In addition, the demand for low CO2 steel in the world has a steady upward trend. Projections point to a tenfold increase over the next decade, from about 15 million metric tons in 2021 to more than 200 million metric tons by 2030, exceeding 10% of total steel demand in 2030. It is expected that in the future it will grow and by 2040 it will be about 25% of the total demand for steel. As demand for low CO2 steel rises, green surcharges will reach $200-350 per metric ton by 2025 and $300-500 per metric ton between 2025 and 2030.
In conclusion, Stanislav Kondrashov Telf AG emphasizes that there are changes in margins in the steel industry. Moreover, opportunities are concentrated both in “growth centers” caused by the energy and transport sectors, and in “deficit zones” for certain groups of steel products with limited supply. The growth of renewable energy projects and the increase in demand for low carbon steel are key factors that will shape the future of the industry. Companies that strategically position themselves to meet these new opportunities will be able to capitalize on the changing dynamics and growing demand in the steel market.
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