January 2022
In 2021, average monthly HRC prices experienced a ‘tale of two cities’. US prices increased significantly during the 11 months to November, ending at US$1,756/t, up 108.3% since the beginning of the year.

In the same period, prices in Europe, the CIS and China increased to US1,063/t, up 36.6%; US$883/t, up 22.3%; and US$694/t, up 9.5%. In the US, average monthly HRC prices peaked in September 2021 at US$1,928/t. Prior to this peak, the average HRC price in the US climb each month for an astonishing thirteen months straight, commencing in September 2020. The persistent price increase in the US was due to shutdowns of various BF/BOF steelmaking facilities amid the Covid-19 pandemic as steel demand evaporated. Steel demand then surged as government stimulus packages were announced to boost the economy. With BF/BOF dominating HRC steelmaking, supply shortage issues occurred as the previously shut down mills required time to ramp up to full capacity, unlike EAF steelmaking facilities. The Covid-19 pandemic also caused a change in individual spending habits. With the inability to travel, holiday spending was diverted to items like home appliances and new cars, increasing steel demand and placing pressure on steel prices.

Average monthly rebar prices continued to trend strongly upwards for the first 11 months of 2021 until November in both the US and Europe, ending at US$1,116/t, up 43.5%, and US$885/t, up 39.6%, respectively, from the beginning of the year. Meanwhile, average rebar prices at the end of November 2021 for the CIS and China were US$721/t, up 26.5%, and US$675/t, up 19.3%, respectively from the start of the year. Average monthly rebar prices surged in both the US and Europe during January 2021 as governments continued to pump prime their economies. After a short respite, average monthly rebar prices increased dramatically in May 2021 in the US, the EU, the CIS and China, rising by 10.3%, 14.6% and 14% and 8%, respectively.

The construction industry in Europe accounts for approximately 35% of total steel consumption. In Europe average rebar prices continued to uptrend in June 2021, rising by 16.1%. This was caused by residential investment supported by record-low mortgage rates and housing schemes in place in many member states. Additionally, construction was supported by the government’s deliberate intervention within the civil engineering construction sub-industry to support the economic recovery.

Imports and Exports

Monthly US steel imports have recovered strongly from their Covid-19 pandemic trough in September 2020, when steel imports were only 1.15Mt. During the first 10 months of 2021 to October, US steel imports averaged 2.4Mt per month, up 44% from a 2020 average of 1.67Mt. Canada’s share of total US steel imports was approximately 25% for the first 10 months of 2021. For the same period, other countries with a significant share of total US steel imports included Brazil, Mexico and South Korea, with 15%, 14.5% and 8.7%, respectively. Notably, in 2018 the US determined that steel imports posed a significant risk to national security and imposed a 25% tariff on certain products under Section 232 of the Trade Expansion Act of 1962. However, in late October 2021, the US and the EU agreed to remove the US Section 232 tariffs on steel and aluminium imports. Before this agreement, the EU was planning to increase its retaliatory tariffs in December 2021. The agreement also means both parties will suspend the disputes they initiated against each other at the WTO in relation to the tariffs. From 1st January 2022, a tariff-rate quota system will be implemented based on historical data volumes. For EU steel exports to the US, a total annual quota of 3.3Mt, covering 54 product categories, will be eligible for duty-free exemption. Steel exports must have been ‘melted and poured’ in the EU in accordance with US requirements.

Steel exports from Japan have been on the decline since their peak in of 43.8Mt in 2012. While in 2020 Japan steel exports came to 31.2Mt, down 28.8% compared to 2012. More recently, Japan’s steel exports for October were 2.78Mt, down 11.4% month on month. For the first 10 months of 2021, Japan’s steel exports averaged 2.72Mt. Japan was once the world’s largest exporter of steel, until it was surpassed by China in 2006. Japan is now the second-largest steel exporter in the world, with the rise of China, concerns of excess capacity and increased protectionist measures all contributing to the decline in Japan’s steel exports. Domestic steel demand has also been decreasing in the past few years from the country’s construction, automotive, machinery equipment and shipbuilding industries. The top three export destinations for Japan’s steel products are Thailand, China and Korea, with shares of 17.7%, 16%, 13.4%, respectively, of Japan’s total exports.

New Capacities and Expansions

New capacity added this year included capacity at PT Dexin Steel Indonesia (DSI), located in Morowali. The company ignited its second blast furnace in February 2021, with capacity of 1.75Mt, to enable total crude steel production of 3.5Mt, and with total investment in phase 1 coming to US$950m. The phase 2 expansion is currently under construction and is expected to be completed by December 2022. This will increase the site’s crude steel capacity by 2.5Mt bring total production to 6Mt. Phase 3 construction will provide additional capacity of 14Mt, with total planned crude steel capacity of 20Mt. 

In Indonesia, Gunung Group (PT Gunung Raja Paksi) increased its crude steel capacity by 1.5Mt in September. The phase 1 investment plan was US$370m and included the construction of a new light section mill and modernisation of the facility’s medium section mill. Phase 2 of the project requires an investment of US$480m and will include the construction of a hot-strip mill, coil-slitting and cut-to-length facilities and steel pipe production facilities. Commissioning is expected in 2022, with the company seeing additional expense savings due to import substitution. Total crude steel capacity is now 4.38Mt.

In October, JSW Steel Dolvi commissioned its new 5Mt BOF, doubling its crude steel capacity to 10Mt. According to the company, this is the biggest-ever single-phase expansion undertaken in the Indian steel industry. The #2 blast furnace was also lit up, with capacity of 4.5Mt, and is the largest unit of its type. Total investment was approximately US$3bn. Other equipment related to the commissioning includes a 0.75Mt coking plant (launched in February 2021), 8Mt pellet plant (launched in March 2021) and continuous casting machine with the capability to produce 4.5Mt of slabs of 220mm thickness and 900-1,650mm width. The hot strip mill was launched in March and has since increased its hot rolled capacity to 8.5Mt, and at the time consumed slabs from Vijayanagar works.

In October 2021, JSW Steel Dolvi commenced production from its two continuous slab casters in Maharashtra, India. The equipment was supplied and installed by Primetal Technologies. The two two-strand casters have total capacity of 4.5Mt of slabs, with the potential to expand to 6Mt in the future. The two continuous casting plants are designed as bow casters with straight SmartMold and machine radius of nine metres and a slab length of 34.5m, casting thickness of 220-260mm and width of 900-1,650mm. Other technology packages installed by Primetal Technologies include the Mold Expert breakout detection system, the LevCon mold level control, the DynaFlex mold oscillator, and the Quality Expert inline quality assurance system.

Further new capacity expected in early 2022 includes the Steel Dynamics Sinton plant, Nucor’s Gallatin Kentucky plant and SteelAsia’s Concepcion works, with new crude steel capacity of 2.72Mt, 1.27Mt and 1.2Mt, respectively. Magnitogorsk Iron & Steel Works (MMK) Metalurji recommenced its HRC production in August 2021. MMK Metalurji initially closed its upstream melt shop operations in 2012 due to unfavourable economic conditions and efficiency considerations. The company has invested approximately US$40m to restart the facility and is expected to produce 2Mt of hot-rolled coil per year.

Mergers and Acquisitions

Baowu steel announced in July that it planned to acquire state-owned Shandong Iron and Steel (Shangang), located in Shandong province in eastern China. Baowu steel produced 115Mt of crude steel in 2020, but at this stage no update on the acquisition or timeline has been provided by the company. The acquisition is expected to be made via a strategic restructure as consolidation in China’s steel industry continues. The merger is part of the government’s supply-side reforms as it strengthens its state-owned industries. If the acquisition occurs, Baowu Steel will have a total crude steel capacity of approximately 145Mt. 

In August, Saarstahl and its parent company, Stahl-Holding-Saar (SHS), acquired French steelmaking assets Ascoval and Hayange. The two sites were acquired following the collapse of Liberty Steel via GFG Alliance’s main financer, Greensill Capital, in March. The acquisition provides the opportunity for Saarstahl to diversity its portfolio by entering the rail market and provide access to new production technology with an EAF. The two plants will allow SHS to implement its strategy to produce high-quality European green steel.

Nucor participated in several strategic acquisitions to position itself for the changing market environment. In August, the company acquired Cornerstone Building Brands’ Insulated Metal Panels business (IMP) for US$1bn. Nucor’s decision was based on targeting end markets to attract free cash flow and enhance EBITDA margins. Nucor will acquire seven of IMP’s manufacturing facilities located throughout North America. IMP is the largest manufacturer of exterior building products in North America, offering lightweight cladding solutions servicing all sub-sectors within non residential end markets. The acquisition accompanies Nucor’s takeover of TrueCore back in 2019.

Nucor acquired two scrap facilities in October under its subsidiary, the David J. Joseph Company (DJJ). Grossman Iron and Steel facility was acquired by Advantage Metals Recycling (AMR) to support the growing steelmaking capacity along the Mississippi and Ohio river system. The total number of recycling facilities owned by AMR has increased to 12. Garden Street Iron & Metal Inc. was acquired by Trademark Metals Recycling LLC (TMR) to provide a strong presence in the Florida market. The total number of recycling facilities owned by TMR has increased to 26. Nucor's new steel recycling acquisitions represent a 10% growth in capacity and indicate Nucor’s commitment to expanding and maintaining its competitive advantage in the industry.

In December, Nucor acquired Vale’s 51% interest in California Steel Industries (CSI), which will become a joint venture between Nucor and JFE Steel Corporation (JFE). Nucor purchased a 50% equity interest from a subsidiary of Vale and a 1% equity ownership from JFE. Nucor will pay a cash purchase price of US$400m to Vale. CSI is a flat sheet steel producer located on the West Coast of the US and will provide Nucor with increased opportunities for internal shipments and create efficiencies to the company’s downstream business of Verco and Hannibal Industries. CSI is 80km from Los Angeles, with the facility located on 1.82km2 of land, and 0.47km2 under a roof. Some of the site equipment includes a hot strip rolling mill, a cold rolling mill, two hot-dip galvanising lines and an electric resistance welded pipe mill, with capacities of 2.77Mt, 0.98Mt, 0.64Mt, and 0.59Mt, respectively.

In November, Cleveland-Cliffs acquired Ferrous Processing and Trading Company (FPT) for approximately US$775m. The Detroit-based FPT is one of the largest processors and distributors of prime ferrous scrap in the US, representing about 15% of the domestic merchant prime scrap market. FPT currently operates 22 scrap processing facilities located primarily in Michigan and Ohio. The strategic acquisition will reduce the company’s costs and optimise productivity at its existing EAFs and BOFs. The new acquisition expands Cleveland-Cliffs’ current portfolio of raw materials to include iron ore pellets, DRI and now prime scrap. With the trend towards reducing carbon emissions, prime scrap will only become more scarce in the years ahead.

BlueScope’s acquisition of MetalX LLC’s steel scrap facilities was completed in December for US$240m. The agreement includes two of MetalX LLC’s ferrous scrap steel recycling operating sites, located in Indiana and Ohio. BlueScope has targeted the US as a key focus for its growth, and the acquisition will strengthen BlueScope North Star’s supply chain and enhance its competitive advantage. North Star is undertaking an expansion to increase its production capacity to 3Mtpa. MetalX LLC currently supplies 20% of North Star’s scrap, and the acquisition will allow the company to secure its supply of both prime and post-consumer scrap.

Commercial Metals Company (CMC) will acquire TAC Acquisition Corporation (Tensar), a portfolio company of Castle Harlan Inc. Fund and Castle Harlan Partners V LP, for US$550m. Tensar is a leading global provider of engineered solutions for subgrade reinforcement and soil stabilisation used in road, infrastructure, and commercial construction projects. CMC believes the acquisition will expand its leadership in construction reinforcement, with value-added products that complement its existing strategy. Once the transaction is complete, CMC is expected to benefit from secular infrastructure spending and environmental trends combined with its superior eco-friendly performance compared to its competitors.