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Specialist Article Metec: The world steel industry in an path to recovery (long version)
With the mood in the steel world brightening, METEC 2011 (28.6. to 2.7.2011) in Düsseldorf is taking place at just the right time. This is strongly suggested by current figures and the forecast of the World Steel Association (worldsteel) in Brussels. According to the latter’s short-range outlook (SRO) published in April, steel consumption would increase by about 11 per cent to over 1.2 million megatonnes in 2010 (the next SRO was to follow in mid-October 2010). This would be roughly equal to the 2007 figure. In 2011, consumption is even expected to rise to a “historic high” of 1.3 million megatonnes (plus 5.3 per cent). At their meeting in Beijing, the experts of the worldsteel Economics Committee attributed this to the unexpectedly swift recovery of ascendant countries like China.
Demand boosted by emerging economies
“The world steel industry now seems firmly set on a path to recovery,” explains committee chairman Daniel Novegil. The CEO of Ternium S.A., the Latin American steelmaker, expects that the strong growth of the emerging, new economic regions that started during the crisis will be “driving world steel demand in the future”. On the other hand, Ternium’s CEO continues, the “old” economic regions are recovering more slowly. The demand for steel, he claims, will be well below the 2007 level in 2011 as well.
All in all, things are picking up again. “The recovery is not only earlier but also stronger than expected,” says the buoyant chairman. In worldsteel’s view, METEC 2011 together with the concurrent GIFA, THERMPROCESS and NEWCAST fairs will be making an important contribution in this.
China’s leading role in the revival
China will be playing a leading role in the industry’s revival. Chinese steel consumption slumped by almost 25 per cent in crisis year 2009. The Economics Committee anticipated growth of 6.7 per cent to about 580 million tonnes in 2010. Also on the rise is India, whose steel consumption is expected to increase to about 72 million tonnes by 2011.
The upturn in the European steel industry stands and falls with Germany as the EU’s biggest crude steel producer. On the world scale, it occupies seventh place behind China (1), Japan (2), India (3), Russia (4), USA (5) and South Korea (6). Important events for the metallurgy sector therefore also take place in Germany. These include the international conference Stahl 2010 of the German Steel Federation and Steel Institute VDEh from Düsseldorf. The conference took place last year under the motto of “Progress is tradition”, when the Steel Institute VDEh celebrated its 150th anniversary with a festive event.
150 years’ experience of crises
Founded as the “Technischer Verein für Eisenhüttenwesen” (Technical Association for Iron Metallurgy) in 1860, the institute with its current 8,000 members (including some 150 companies) promotes the further development of steel technology and steel as a material. In the 150 years of the association’s history, companies have learnt to cope with crises. “After months of economic gloom in the aftermath of the financial crisis, business has been recovering on a broader front since the beginning of the year, even if economic trends are still fragile,” stresses Hans-Jürgen Kerkhoff, President of the German Steel Federation and Chairman of the Steel Institute VDEh.
Current figures suggest that the economy is continuing to stabilise. In the first six months of 2010, for instance, the steel companies produced almost 23 million tonnes of crude steel, 64 per cent more than in the same period of the previous year. This figure demonstrates that business for German steel processors is recovering faster than expected.
A key role in international metallurgy is played by German manufacturers of metallurgical and rolling mill installations, who build plant for the production of pig iron and nonferrous metal products, machines for metal forming (such as rolling mill stands) and downstream installations for the metallurgy sector.
No. 2 in exports
In 2007, the year of the last METEC, the sector was benefiting from the powerful boom of the world economy and world steel markets. By 2009, the production of machines for metallurgical plants and rolling mills had risen nominally from about 1,900 to over 2,300 million EUR. German manufacturers occupy second place in exports behind Italy.
Current trends are positive. Since the beginning of 2010, order levels in the industry have risen on average, although this must be seen in the light of the previous year’s low levels. In the VDMA’s current machine manufacturing forecast of summer 2010, the association raised its output forecast for 2010 in machine manufacturing as a whole to plus 3 per cent in real terms. The various predictions in the subsectors of the machine manufacturing industry continue to range from plus 30 to minus 30 per cent. In the middle range, manufacturers of equipment for metallurgical plants and rolling mills were expected to pilot their way through the post-crisis phase in 2010. The roughly 30 per cent increase in incoming orders achieved up to and including June would not yet suffice, the association believed, for the achievement of marked growth in turnover in 2010 as a whole.
Success heavily dependent on exports
The ongoing success of this strongly export-oriented industry is heavily dependent on trends in foreign markets. “The emerging economies in particular continue to hold out good mid- to long-term prospects for stable export trends for the industry,” explains Dr. Gutmann Habig, Managing Director of the VDMA Metallurgical Plants and Rolling Mills Association. “Powerful surges in crude steel and aluminium production are expected here in 2011. The focus is on Brazil, Russia, India and China.” This was already indicated by the then export figures: from January to May 2010, for example, compared to the prior-year period, exports to Brazil and Russia rose by 260 per cent to 17 million EUR and by 40 per cent to over 32 million EUR, respectively. Exports to China still account for the biggest share, but, at a little over 100 million EUR, are still below the previous year’s value for the same period. Another ray of hope can be found in Central America, with supplies to Mexico worth almost 41 million EUR.
Experts see the driving force behind the upturn in the decision of emerging economies in Asia and Central & South America to invest heavily in infrastructure. Winfried Resch, spokesman of the VDMA Metallurgical Plants and Rolling Mills Association: “India aims to double its steel production to 120 million by the year 2020.” The bulk of the extra steel will be used in the construction of roads and bridges. This trend in Asia is exhibited by virtually all orders, 95 per cent of which, according to Resch, are for long products, such as rails, steel bars and wire, or pipe & tube. Because of the economic crisis, demand for flat products (very wide, thin strip, sheet and plate) has plummeted. Flats are used above all in the automotive industry and, for instance, in white goods such as washing machines.
Positive factor: METEC 2011 in Düsseldorf
Another positive factor for machine and plant manufacturers in metallurgical and rolling mill technology is METEC 2011, the world’s leading international metallurgical trade fair. “For our sector, this is a globally leading trade fair that points the way forward,” Resch explains, adding: “It is a unique combination of four trade fairs.”
A global increase in demand for steel due to the improvement in overall economic conditions has also been observed by ThyssenKrupp Steel Europe AG. In the first nine months of its past business year (starting 1 October 2009), the company recorded a 47 per cent increase in orders over the previous year. “The ordered quantities almost doubled, and capacity utilisation is back to a good level,” Executive Board member Dr. Jost A. Massenberg reports. “The strongest impetus has come from customers in the trading and service centre segments. Business with the automotive industry has continued to stabilise in the course of the year.”
Sharp increase in the cost of raw materials
The board member expected the upturn in the world economy to continue in the course of 2010, albeit at a slower rate. In the emerging economies, steel consumption continued to rise. Speaking in 2010, Dr. Massenberg said: “There are no signs of notable growth in real consumption, particularly in Europe. The steel market is still badly shaken by the so far massive increase in the cost of raw materials this year, the departure from the benchmark system and uncertainty about how things will develop. We are having to pass on the sharp increase in raw materials costs to our customers in the form of higher steel prices.”
But how does the steel corporation view longer-term developments? Does ThyssenKrupp Europe still see itself producing steel in the EU ten years from now? According to the Executive Board in Duisburg, the company operates one of the world’s most productive integrated steel mills and one that is kept constantly in line with the state of the art. “We have a unique location strategy with production capacity of almost 17 million tonnes at a single site,” the board member stresses. “Our plant configuration meets the highest technological standards and our employees are highly skilled and motivated.” All this strongly suggests that ThyssenKrupp Steel will be able to operate profitably at its German location in the long term. Dr. Massenberg: “This only applies, however, as long as we are not put at a serious disadvantage versus our non-European competitors. We are particularly concerned in this respect by ongoing trends in climate policy in the European Union.”
Contact: Press Office GIFA, METEC, THERMPROCESS, NEWCAST 2011
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