Bloomberg: Steel industry entered its heyday after "lost decade"

Bloomberg: Steel industry entered its heyday after "lost decade"
Bloomberg: Steel industry entered its heyday after "lost decade"

Perhaps this is the best time to enter the steel industry.

Since the beginning of the year, steel prices have exploded worldwide, continuously conquering one record after another. Behind the rise is strong industrial demand, with factories scrambling to run at full capacity to increase supply after virtually freezing during the pandemic.

Besides, there is also a reason from the supply side, when the world's leading producing countries such as China and Russia limit steel exports to meet domestic demand.

"If you asked me six months ago what my most optimistic vision for the first half of 2021 is, I wouldn't have thought it would come to fruition so close," said Carlo Beltrame, leader of AFV Beltrame. . The steel company is planning to build a $295 million steel mill in Romania with a capacity of up to 600,000 tons per year.

Bloomberg: Steel industry entered its heyday after "lost decade"

Steel prices have surged around the world since the beginning of the year.

After a gloomy decade with many factories being forced to close and lay off workers because of too low demand, the European steel industry is entering a new page. That is also the general picture of steel companies around the world, when US President Joe Biden wants to spend a lot of money on infrastructure and the European Union wants to achieve the goal of reducing emissions. equals 0.

The world's leading manufacturers such as Nucor Corp, U.S. Steel Corp and SSAB AB both forecast big profits. ArcelorMittal SA, the largest steel company outside of China, will be more profitable than consumer companies like McDonald's or PepsiCo, according to analysts.

Many people predict that the heyday of the steel industry will only last until 2022. Keybanc Capital Markets and Bank of America believe that the bottlenecks that caused US steel prices to rise sharply will begin to be removed this year. However, many analysts believe the opposite, saying that prices will continue to hold high in the long term.

Of course, developments in China will be key, as this is the market that produces more than half of the steel consumed worldwide. China's steel mills mainly use coal-fired heat treatment furnaces, while the government has signaled that it does not want to continue to bear the same great environmental burden as before.

According to Lu Ting, senior analyst at Shanghai Metals Market, China will face a big challenge to achieve this year's output cut target as output was already at a very high level at the beginning of the year. However, other countries in Asia are willing to make up the shortfall in supply.

For example, India's top steel producer JSW Group said it will achieve its goal of doubling capacity to 45 million tonnes by 2030. Southeast Asian countries such as Malaysia and Indonesia also plan to reach the end of the decade. This century will increase production by 60 million tons.

Huge stimulus packages focused on US and European infrastructure are another cause for optimism about the steel industry. Mr. Biden is determined to build more roads, railroads and buildings that will mark his term. Meanwhile, the EU emphasizes that clean energy is an important part of the post-Covid-19 economic stimulus package.

To complete these programs, the EU and the US need a lot of steel. According to estimates by London-based consulting firm CRU Group, Biden's infrastructure plan will increase US steel demand by 5 million tons per year for the first five years. Meanwhile, by the end of 2022, the capacity of the US steel industry is forecasted to reach only 4.6 million tons/year.

Despite the increased demand, Western steel companies are still hesitant to expand production. They are all trying to pay off their debt and the top priority right now is profit for shareholders instead of reinvestment.

In addition to the reason that it has been a painful decade, another reason is the fear that governments will not be able to forever apply protectionist measures to the domestic steel industry, even though Mr. Towering import duties have been in place since the Trump era and last month the EU decided to extend protectionist measures for another three years.

Particularly AFV Beltrame is still excited about the plan to build a new factory in Romania. It will be the world's lowest-emission steel plant, according to the company's statement. "I believe the super cycle will last for many more months. We still need bricks, cement and steel," Beltrame said.

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