News Room - Steel Industry

Posted on 07 Apr 2020

Some Middle East steelmakers slash output as COVID-19 shrinks markets

Koc Metalurji, a long steel producer based in Osmaniye, southern Turkey, will suspend output at its meltshop for a month from April 7. The stoppage could extend as long as three months, based upon market conditions and the virus outbreak, the company said. The company's rolling mill is currently operating but is likely to be halted in coming days. Koc Metalurji has a production capacity of 1.2 million mt/year liquid steel and 500,000 mt/year rebar. 

Turkey, Iran, Algeria and other Middle Eastern and North African nations have become significant steel producers in recent years, on population growth and local availability of raw materials including iron ore and natural gas. The Middle East region produced 45.3 million mt of crude steel in 2019, up 19.2% on 2018, according to the World Steel Association (worldsteel).

Now, as the region feels the toll of the coronavirus outbreak, with related production, markets and logistics restraints, observers expect major steel producers in Turkey and Algeria to work at around half capacity or less for the next month or more and Saudi Arabia's Sabic Hadeed has closed production at one plant, according to sources close to the company. Iran, however, continues to produce steel at normal levels.

 

Infrastructure

 

 

Turkey - Output plunges in April

 

Turkey produced 33.7 million mt crude steel in 2019, down by 9.6% on 2018, according to worldsteel. Observers expect its crude steel output to fall around 50% in April from recent monthly levels with these latest output cuts, undertaken due to falling sales and other adverse market conditions arising from the globally expanding COVID-19 outbreak.

- Longs producers

- Flats producers

 

• Isdemir, Turkey's largest integrated steel producer, the Iskenderun-based mill of Erdemir Metalurji Group, will pause one blast furnace for maintenance from the second week of April. The maintenance is expected to be finished within a month. Isdemir produces hot-rolled coil, rebar and wire rod with a liquid steel capacity of 5.3 million mt/year. Erdemir Metalurji Group's total crude steel production capacity is 9.1 million mt/year.
• Colakoglu, one of Turkey's largest steel producers, is starting scheduled maintenance at its hot-rolling line in the second week of April. The maintenance is expected to be finished within two weeks. It has a hot rolled coil (HRC) production capacity of 4.5 million mt/year and rebar rolling capacity of 1 million mt/year.
• Yildiz Demir Celik, a coated coil producer has started maintenance at its 500,000 mt/year capacity galvanizing line.

 

- Pipe producers

 

• Borusan Mannesmann, Turkey's largest steel pipe producer, paused output at its Vobarno plant in Italy due to the coronavirus outbreak at end March, and also paused output at its Halkali works in Istanbul and Gemlik spiral-welded pipe works in Bursa for protection purposes as of the beginning of April till April 13. Production activities at the company's other steelworks in Gemlik, Bursa are currently continuing. It is also continuing pipe production at its US mill, classed as strategically important under US law. Borusan Mannesmann's Turkish mill capacity is 750,000 mt/year of longitudinal welded pipe and 300,000 mt/year of spiral welded pipe. Capacity for cold-drawn special pipe at its Vobarno plant in Italy is 28,000 mt/year. The company's US electric-resistance welded pipe mill in Baytown, Texas, has a capacity of 300,000 mt/year.

 

 

Saudi Arabia and United Arab Emirates

 

 

• Sabic Hadeed, Saudi Arabia's largest steelworks, has temporarily closed one plant due to a case of COVID-19 at the site, market sources reported Monday. The steel plant has a total production capacity of 6 million mt/year and a direct reduction plant with total production capacity of over 5 million mt/year, while its long and flat rolling mills have annual capacities of 4 million mt/year and 2 million mt/year, respectively, according to the company's website.
• UAE steel mills are reportedly maintaining usual production levels, but may cut output to match demand.

 

 

Algeria - Half workforce on paid leave

 

In late March the Algerian government enforced a decree urging companies, including steel producers, to put half of their workforce on paid leave if their presence in the workplace is not essential for business continuity. Algerian steel mills have a capacity to produce around 6 million mt/year of construction rebar. However, demand in recent years has been put at around 4 million mt/year and measures to restrict imports have been under consideration.

 

• Tosyali Algerie, the largest Algerian steel producer, with crude steel capacity of 3.8 million mt/year, has cut its production by 50%, according to several sources.
• Algerian Qatari Steel, AQS, has reduced its production by 70%. A company spokesman said last week melting operations had been stopped, with the company focusing only on rolling operations. AQS has 1.2 million mt/year crude steel capacity.
• Sider, formerly ArcelorMittal Annaba, has stopped its blast furnace with around 1 million mt/year capacity and has reduced remaining activities by 70%.
• Local rerollers, which altogether have a capacity of around 200,000-300,000 mt/year and depend on billet imports, also had to halt production as traders stopped imports.

 

 

Iran - Full production continues

 

The Iranian government has instructed all industries (including steel producers and mining companies) to continue their production as scheduled, despite the ongoing global COVID-19 crisis, according to a directive issued by the Ministry of Industries, Mining and Trade on March 28. An informed source in the steel industry said that all of the steel mills and mines are still working, mainly at their full capacity, and no decline in production has been reported by the major producers. However, the spread of coronavirus is expected to impact new projects. However, there are logistics bottlenecks in exporting to neighboring countries. For instance, borders with major customer Iraq remain closed for time being.

 

• Iran's crude steel output increased to 24.9 million mt over the first eleven months of the current Iranian year (March 21– February 19), a 10% increase on year, according to the Iranian Steel Producers Association (ISPA).
• Estimated production for the current year is about 30 million mt, according to informed sources.

 

 

Prices and trade flows

 

 

 

• Turkey: Slow demand for finished steel products in export markets arising from the globally expanding coronavirus outbreak has pressured Turkish mills' pricing in recent weeks, while a sharp depreciation of the Turkish lira against the US dollar has also limited trade activities, notably in the domestic market, by heightening cash flow problems.
• Turkish mills' flats and longs prices have fallen as much as $40-$50/mt since mid-March in that period in line with imported scrap prices: the nation is a major ferrous scrap importer. Turkish mills have begun to offer rebar both to domestic and export markets at $380/mt ex-works and even below for large tonnage bookings as of the first week of April, while imported scrap prices fell as low as $207/mt CFR.
• However, output suspensions one after another by Turkish long steel producers in recent weeks have created some supply problems for rebar, and scrap availability also fell in this period due to the impact of the virus. Turkish long producers have therefore raised their rebar offers by around $15-$20/mt as of the beginning of this week. However, there were doubts Monday that these higher offers would be accepted by the market, amid the ongoing COVID-19 outbreak.
• Iran: Iranian mill offers slipped $5/mt in mid-March to between $390 and $400 /mt EXW, in line with market declines due to coronavirus, according to domestic traders. Immediately after this there has reportedly been very little activity in the domestic market due to the new year's holidays which were expected to be extended for two weeks or more by the government.
• Algerian logistics were reported last week at a standstill, with trucks not moving, ports not allowing ships to berth and building works halted, bringing the steel long products market to a halt.
• Saudi Arabia's Sabic Hadeed (price setter for the local market) has maintained last month's rebar prices at SAR2,400 ($637.41/mt) given what it saw as good domestic demand. Other local mills expect prices to be impacted.
• UAE-based Emirates Steel cut domestic rebar prices late last week given low demand to $460/mt from $505/mt. Other locals mills followed.
• UAE-based Al Ghurair Iron & Steel lowered June shipment prices for its hot-dipped galvanized products in line with the weak current market trends for this product, the company said Monday. The company is offering 1 mm 275z HDG for $750/mt on a delivered basis to the domestic market and $750/mt FOB to export market for June deliveries, compared with previous offers of $780-$800/mt.
• Import prices for HRC in the region fell as demand was also affected by the ongoing coronavirus crisis. Mills from India, Japan and South Korea are currently offering hot-rolled coil for $420-$430/mt CFR to UAE, compared with previous offers of $480-$490/mt CFR, sources said.
• Traders said documentation and logistic issues, for instance out of India, are delaying shipments, and that new prices for some products may be announced in 10 days.

 

Source:S&P Global Platts