FOCUS: Steelmaking boom in Algeria likely to end billet imports
Algeria’s steel billet import market is set for dramatic changes in the next couple of years, largely as a result of the country’s fast-growing local steel industry.
The country’s steelmaking capacity is expected to grow by around 7 million tonnes by the end of 2020, which will lead to significant reduction in, if not the total elimination of, billet imports, sources told Metal Bulletin.
CIS semi-finished steel suppliers will be most affected by the changes, due to currently supplying most of the billet volumes shipped to the North African country,
In 2017, Algeria became one of the biggest billet importers in the Middle East-North Africa (Mena) region following a massive expansion in domestic long steel rolling facilities - as a result of significant foreign investments and the Algerian government’s protectionist policies with regard to steel imports.
Steel billet imports increased almost five-fold in 2017, to 1.8 million tonnes, compared with just 372,432 tonnes in 2016, according to the International Steel Statistics Bureau (ISSB). Of that total, some 1.65 million tonnes originated from Russia and Ukraine, with the remaining volumes mostly coming from Turkey, Iran and Europe.
However, despite the likelihood of drastic changes, a CIS producer told Metal Bulletin that billet volumes could easily be redirected to any of the markets previously supplied by steel from Iranian mills, which are now facing trading restrictions as a result of the reintroduction of sanctions by the United States in August.
The Gulf Co-operation Council (GCC) region, North Africa and Southeast Asia were the major outlets for Iranian billet. In the previous Iranian year ended March 20, 2018 billet and bloom exports from Iran totaled just 4.02 million tonnes, marking an 86% year-on-year increase from 2.16 million tonnes in 2017.
A source trading billet to Algeria, however, suggested that Algerian mills may also follow the example of Turkey and partially switch from producing their own billet to importing billet again, depending on the price of raw materials.
Meanwhile, Algerian producers are trying to cut their future production costs as much as possible by installing their own pelletizing plants and direct-reduced iron (DRI) facilities.
One of the major steel projects in Algeria is the expansion of steelmaking capacities at Oran-based Tosyali Algeria from 1.25 million tonnes to 3.55 million tonnes, which was finalized this spring.
The subsidiary of Turkey’s Tosyali Holding has also increased its long steel rolling capacity - from 900,000 tonnes in 2013 to around 3 million tonnes in 2017, mainly producing rebar and wire rod.
Tosyali Algeria also hopes to commission a 2.5 million-tpy DRI plant and a 4 million tpy pellet plant by the end of 2018, according to sources.
Another meltshop, with the capacity to produce 2 million tpy of crude steel is expected to come on stream in the first quarter of 2019 at Bellara-based Algerian Qatari Steel (AQS), a joint venture between state-run Sider (51%) and Qatar Mining International (49%).
Along with the meltshop, the producer is planning to build a 2.5 million-tpy DRI plant, 750,000-tonne rebar mill and 500,000-tonne wire rod mill.
Currently AQS operates a 750,000 tonnes rebar mill, installed in October 2017.
Additionally, steel production is expected to restarted at the Annaba-based El Hadjar Steel Complex by 2020.
In April, the Algerian government entered into an agreement to sell a 49% stake in the idled state-owned steel complex to United Arab Emirates-based steel and construction company Emarat Dzayer.
The development at the El-Hadjar site will include the installation of a 2.50 million-tpy direct-reduced iron (DRI) production facility with an estimated deadline of April 2021.
Emarat Dzayer also hopes to install a 1.50 million-tpy electric arc furnace (EAF) so it can make semi-finished steel products such as billet and bloom. The estimated date for completion is April 2020.
And the company also plans to acquire a 600,000-tpy rolling mill to produce 80-320mm medium and heavy profiles, also to be completed in April 2020.
End of a good movie
Algeria used to be a major long steel importer, but in recent years has seen a sharp drop in import volumes following the development of local long steel rolling capacities and government’s severe protectionist policy. Italy and Spain were the major suppliers of rebar and wire rod to the destination.
The restrictions sent the country’s long steel import volumes down to 2.60 million tonnes in 2016, compared with 3.34 million tonnes in 2015, according to Metal Bulletin Research.
In 2017, the decision over rebar quota size was not taken until July, when rebar licences for the rest of 2017 for a total volume of 534,100 tonnes were distributed among 113 importers.
For wire rod, no import licences were issued that year.
The additional rebar import licenses amounting to around 400,000 tonnes were issued in late September.
Then, in October 2017, a new regulation was issued by the Algerian Central Bank, requiring importers of finished goods for resale to provide a financial guarantee worth 120% of the value of the imported products. This was to be done at least 30 days prior to the shipment of the goods.
Algeria’s rebar import totaled 865,743 tonnes in 2017, according to ISSB. Wire rod import was just 90,401 tonnes. Major suppliers were Italy, Spain and Portugal.
European exports of rebar into Algeria totalled 96,386 tonnes over January-April 2018 and wire rod exports amounted to 29,000 tonnes, according to European steel association Eurofer.
“Algeria is the end of a good movie - and hardly any other export market could substitute for it in such volumes,” Andrea Floreani, sales manager at Italian long steel producer Pittini, told Metal Bulletin earlier in May.
Considering the diminishing long steel imports and developing steelmaking and rolling capacities, as well as insufficient domestic demand, means the Algerian market is likely to turn from a net importer into an exporter of steel products, some sources said.
“There is still no real domestic demand in Algeria,” a source told Metal Bulletin, adding that local producers keep long steel product stocks high.
A trader in the Middle East said that some export rebar sales had already taken place in Algeria.
Viral Shah in London contributed to this report