7 things we learned at Fastmarkets’ Singapore Steel Forum

The 2022 Singapore Steel Forum, located in the plush surroundings of the iconic Marina Bay Sands hotel, provided the ideal setting for market participants to discuss the hottest steel topics of the day last week

Easing Covid-19 restrictions in Singapore meant that the event could be held in a physical format for the first time on May 18, and for many delegates it marked the first in-person event attended since the global Covid-19 pandemic began in early 2020.

Fastmarkets outlines seven of the biggest takeaways from the event:

1. Asian steel prices may still have room to fall

Market participants told Fastmarkets on the sidelines that prices for steel and ferrous scrap in particular face further headwinds in the coming weeks.

A shaky economic outlook and futures market in China were key reasons cited by sources, but more market-specific factors were also said to weigh on sentiment, such as an oversupply of scrap at scrapyards in the United States, and a drop in export orders for steelmakers in certain countries.

Major mills in markets such as Vietnam and Bangladesh have also been heard to have cut back on steel production in recent weeks. A few large mills in Bangladesh are understood to only be producing at 50% capacity.

2. India expected to become a significant scrap importer again

Panelists in the Fastmarkets Asia steel scrap discussion at the event cited India and Bangladesh as two markets most likely to grow as importers of the secondary raw material over the next decade.

Zain Nathani, director of the Material Recycling Association of India (MRAI) and director of Nathani Steel, said that Indian electric-arc furnace (EAF) and induction furnace (IF) upbuild would play a significant role in the capacity increase in the country expected over the next 10 years.

The Indian government has long set a steel capacity target of 300 million tonnes by the 2030-2031 fiscal year and while blast furnace (BF) capacity increases are going to play a large role, panelists also pointed to an upbuild in EAF capacity by major mill Jindal Steel & Power (JSPL).

This would increase India’s appetite for scrap imports, both in the form of bulk cargoes and containerized shipments, with the local market unlikely to be able to satisfy the new demand, panelists said.

India imported 3.63 million tonnes of steel scrap in 2021, down by 11.6% year on year, according to the International Steel Statistics Bureau (ISSB).

3. Ukraine tipped to become net steel importer after war ends

Another key topic at the event was the future of Ukraine’s steel market once the war with Russia eases.

Ukraine is likely to become a net importer of steel once the war ends and rebuilding activity restarts, Stanislav Zinchenko, chief executive of Ukraine-based think tank GMK Center, said at the event last week.

Due to the war, Ukraine has lost 40% of its pig iron export capability, 100% of plate and slab export capabilities, 30% of hot-rolled coil and cold-rolled coil export capacity and 30% of domestic hot-dipped galvanized supply, according to Zinchenko.

4. Major Indonesian steelmaker starts selling smaller-sized billet

A major Indonesian BF-based mill, which has struggled from a lack of export sales for 150mm steel billet of late, has now started selling for export smaller 130mm billet, sources said on the event sidelines. The smaller size is preferred in the Philippines.

At least two sales to the Philippines involving this size of billet have been heard in the past fortnight. Sources mostly felt that the move would lead to higher supply and lower prices for billet imports to key Southeast Asian markets.

Fastmarkets’ price assessment for steel billet import, cfr Manila was $650-660 per tonne cfr on Thursday May 26, down by $20-30 per tonne from $680 per tonne cfr a week earlier.

5. Chinese traders find ways to prosper amid tough conditions

Some Chinese trading firms have been quick to react to find opportunities amid highly volatile markets for semi-finished steel products, sources said at the event.

Chinese traders swiftly switched from importing semis at the beginning of the year to facilitating export deals for similar material.

They have also ramped up their handling of Russia material following Russia’s invasion of Ukraine in February, which is a trend that panelists and sources on the sidelines expect to see continue.

6. Derivatives offer new ways of hedging price risks, improving margins

Derivatives offer the global steel markets ways to hedge price risks and improve trading margins, panelists on the derivatives and trading panel told market participants during the Singapore Steel Forum.

Panelists from the London Metal Exchange, Singapore Exchange (SGX), Duferco, Cargill and Freight Investor Services described various methods of hedging using derivatives, and also spoke at length about how the global international ferrous markets had changed in the past 20-30 years to become more transparent and volatile.

There was also growing acceptance of derivatives in the international steel industry, with the LME and SGX looking for opportunities to list new contracts that are relevant for steel market participants.

Market participants can also consider moving away from solely using fixed prices to buy and sell their steel cargoes, and instead consider using daily average prices to reduce trading risks caused by volatile movements, which is what is being seen in the spot market currently, panelists said.

7. Indonesia’s Gunung Raja Paksi leads the way in decarbonization

Indonesia’s largest privately owned steel mill Gunung Raja Paksi is future-proofing its business through green steel investments, with an aim of reducing carbon emissions and shifting toward supply contracts where such products are central. It is also seeing signs of green steel products selling at premiums to non-green carbon steel.

Gunung Raja Paksi is also looking to penetrate new markets with its brand of green steel, especially to carbon-conscious markets such as Europe and the US. It is not just targeting new geographical markets, but also new industrial segments such as wind turbine, solar and hydroelectric power generators, and supplying key materials to build such farms.

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