Cargoes of iron ore and coking coal — the main commodities required for steelmaking — became more numerous recently, responding to rising production of steel. In Asian and European countries seaborne raw materials imports for this industry have been boosted by a pickup in steel demand and output, contrasting with a generally weak trend last year.
A vigorous performance at China’s steel mills has contributed to robust growth in iron ore and coking coal imports. These volumes comprise over two thirds and about one-seventh of global trade in the two categories respectively. But other countries in Asia, and also in Europe, also have seen stronger production trends benefiting raw materials usage.
During the first five months of this year, rising steel output has been achieved in many countries. These increases reflect economic activity as a general driver, and progress in manufacturing industries and construction work using steel, as a more direct influence. Other aspects reflected in steel mills’ activity are inventory changes, and steel products exports and imports flows.
Among the largest importers of raw materials, India (a major coking coal buyer) saw the biggest percentage steel production increase. The January–May 2017 crude steel production volume was 7.4% above the same period a year earlier, according to World Steel Association statistics, at 41.8mt (million tonnes). China recorded the second highest rise of 4.4% based on provisional figures, lifting the vast output to 346.8mt.
After a long period of weakness, European Union steel production rose by 4.1% to 71.7mt, although individual member country’s experiences varied greatly. Germany and Italy increased volumes by about 2%, to 18.6mt and 10.3mt respectively. Much larger rises were seen in France, up by 11% to 6.6mt, and Poland where a 16% increase to 4.3mt occurred.
In Asia, Taiwan raised its crude steel production total in the same five months period by 3.6% to 9.3mt. Of more consequence for iron ore and coking coal trade volumes, Japan and South Korea both saw 2% increases in steel output, to 43.9mt in Japan and 28.4mt in Korea.
THE GIANT’S STRIDES
China’s seaborne imports of iron ore and coking coal totalled 1.04 billion tonnes in 2016, equivalent to almost two-thirds of world seaborne trade in the two commodities, based on Clarksons Research data. The upwards trend revived last year, mostly reflecting an acceleration of iron ore imports growth.
Consequently there is again an immediate focus on this aspect of global minerals movements. Optimism for another large increase in 2017 as a whole has been reinforced by rapid expansion in the past few months. Iron ore imports into China (the largest part of the country’s raw materials total) rose by 32mt or 8% in the January–May period this year, reaching 445mt. But some analysts are not confident that such a strong growth rate can be maintained throughout the entire twelve months.
One uncertainty is the steel production trend. The government’s economic stimulus measures introduced last year have benefited steel using industries over a longer period than expected. Recently, however, there have been signs that some tightening of policy is now under way, implying a restraining influence which could cause steel output to falter.
There are also questions about iron ore stocks at ports.
These rose quickly by a fifth from the beginning of this year up to the end of May, reaching a reported 137mt, significantly contributing to growth in import demand. At that level, potential for reduction seems greater, which could also restrain imports during the second half.
Adverse influences, if these occur, could be offset at least partly. Greater substitution of iron ore produced by domestic mines in China, with foreign supplies, is still a valid expectation.
But much depends on relative prices, and possibly also changes in government policy, neither of which are easily predictable.
What will happen elsewhere in the remainder of 2017? The strengthening steel production tendency in a number of countries could be maintained especially if, as seems likely, some economies continue gaining momentum.
The European Union has attracted attention because of the notable pickup in the region’s steel industry since this year began. Even so, the latest European Steel Association quarterly report, which does not predict actual production volumes, was able to foresee only a marginal one percent rise in steel demand during 2017, although any improvement in the steel products trade picture might benefit output.
In Japan, South Korea and Taiwan positive signs have emerged but these have not yet pointed to more than limited steel production increases this year. The main exception, among the large producers, is India where vigorous economic progress is clearly buoying steel demand.
Additional imports of iron ore and coking coal into these countries seem likely to have a positive effect on global seaborne trade volumes this year. Some forecasts also show extra purchases by a range of smaller buyers, such as iron ore into Oman (8mt last year) and coking coal into Brazil (15mt last year).
The principal doubts, as already expressed, surround China’s trend: slowing domestic steel demand remains a possibility, together with other restraints.