metal bulletin top10 2012 steelmakers

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Top steelmakers 2011

supplements

Metal Bulletin’s ranking of top steelmakers by crude steel output published each yearis eagerly awaited for what it reveals about the fortunes of the global steel industry, thechanging geographical pattern of steel production and the ‘rising stars’ among the toptier of international steel companies in terms of size.

This year’s ranking, based on each company’s crude steel output in 2011, includes noless than 128 steelmakers with an annual crude steel output exceeding 2 million tonneseach – 12 more than for 2010.

Chinese steelmakers continue to dominate, taking 61 slots out of the 128. And as manyas 9 of the top 20 places are taken by companies based in China. Amongst other countriesin the BRIC nations, Brazil has 3 steel producers in the list, Russia 7 and India 5, socompanies in that dynamic group now account for three-fths of positions on the list.

ArcelorMittal remains the biggest global steelmaker by far, producing 32.5 million

tonnes more than the next largest: China’s Hebei Iron & Steel Group, which producedover 59 million tonnes of crude steel in 2011.

Hebei is amongst the companies showing the biggest gains in output in 2011: 12%more than in 2010. Other Chinese, and South Korean, companies dominate the subset ofsteelmakers recording signicant gains in output 2010-11, although Italy’s Riva Group and

Australia’s Bluescope are also noteworthy for their growth in output in percentage terms.To complement this year’s ranking table, half-a-dozen steel journalists in Steel First’s

extensive international network have contributed articles reviewing the key drivers andoutlook for steel producers and markets in their regions. To provide an overall globalperspective, the Metal Bulletin Focus team has brought together some other key steelstatistics within a commentary on the status and prospects for production and tradeworldwide. Credit is due to the Metal Bulletin Company Database team for collectingtogether and processing the raw data needed to create the ranking of top steelmakerspresented on the next two pages.

As a brief summary foretaste, worldsteel forecasts that global steel use will rise 3.6%to 1.422 million tonnes this year. Latin America is expected to increase production andconsumption in 2012 and, looking further ahead, Mexican steelmakers in particular aremaking signicant investments to boost capacity. After a very buoyant start to this year,

North American producers have seen some cooling of capacity utilisation rates in recentmonths, but still have the momentum to remain reasonably optimistic at present.

With such dominant steelmaking capacity, China continues to concern producers wellbeyond its borders. External analysts opine that the government’s efforts to consolidateits steelmaking industry need renewed vigour, while within the country the signs are that

the tone has changed from one expressing a need to restrain a potentially overheatingeconomy, particularly in real estate, to one returning to an emphasis on employment andinfrastructure development during a period in which uncertainties about the health ofthe nation’s export markets in the West seem to grow daily.

Worries about the huge nancial problems facing the eurozone, and their

unpredictable consequences, overshadow not only Europe’s own steel producers but themany nations with whom the region’s member countries trade.

Wherever your business is based – and whether you are a participant in, supplier to, orobserver of global steel production and trade – you will nd some valuable insights and

perspectives within this special supplement.

Relentless capacity expansion CONTENTS

Top steelmakers 2011 4

The new world ranking by production

The changing face of steel 7

How global steel has been changing in terms

of output, trade and demand

Around the regions 10

The key factors impacting the industry around

the world

Chinese capacity climbs further 10

Record output in Latin America 10

North America addresses some 11 imbalances

Pressures mount in Europe into 2012 13

Russian steelmakers brace for tougher 15

times

Ambitious plans and political turmoil 17

in Middle East and North Africa

Published by the Metals, Minerals and Mining division of MetalBulletin Ltd.Metal Bulletin Ltd, Nestor House, Playhouse Yard, London EC4V5EX. UK registration number: 00142215.Editorial headquarters: 5-7 Ireland Yard, London EC4V 5EX.Tel: +44 20 7827 9977.Fax: +44 20 7928 6892 and +44 20 7827 6495.E-mail: [email protected]: http://www.metalbulletin.comMetal Bulletin Focus:Editor, Richard Barrett; Associate Editor, Steve Karpel.Tel: +44 (0)20 7827 9977Magazine design: Paul RackstrawPublisher:Spencer WicksManaging Director:Raju Daswani

Customer Services Department:Tel +44 (0)20 7779 7390 Advertising: Tel: +44 20 7827 5220Fax: +44 20 7827 5206.E-mail: [email protected]. Advertising Sales Director:Mary ConnorsSales Team: Julius Pike, Abdul Zaidi, Susan ZouUSA Editorial & Sales: Metal Bulletin, 225 Park Avenue South,8th Floor, New York, NY 10003.Tel: +1 (212) 213 6202.Toll free number: 1-800-METAL-25.Editorial Fax: +1 (212) 213 6617.Sales Fax: +1 (212) 213 6273.Subscription EnquiriesSales Tel: +44 (0)20 7779 7999Sales Fax: +44 (0)20 7246 5200Sales E-mail: [email protected] Bulletin Ltd is part of Euromoney InstitutionalInvestor PLC:Nestor House, Playhouse Yard, London EC4V 5EXPrinted by The Magazine Printing Company plc, Enfield EN3 7NT, UK© Metal Bulletin Limited, 2012

June 2012 | Top steelmakers | 3




Global review

June 2012 | Top steelmakers |7

The steel industry has undergone dramaticchanges over the last decade: there has notablybeen continuing consolidation andmultinational investments to form larger, trulyglobal companies, and there has been the greatsurge in Chinese output to form around half of theworld’s total. Neither should it be forgotten that

there have been steady technological advancesthat have improved the cost base, quality andenvironmental performance in both electric andintegrated steelmaking.

Consolidation has made it easier for someproducers to control costs, adjust output to moreclosely follow the market, and so to some extenthave geate inuence ove pices. While somehave forecast the eventual emergence of severalgroups of over 100 million tpy capacity, so far onlyArcelorMittal has reached this magnitude.Nevertheless, the emergence of larger entities iscontinuing, especially in China, where the HebeiSteel group has become the world’s second

biggest steel producer with over 59 milliontonnes last year.

The “cedit cunch” nancial cisis of 2007-2008badly hit many major economies, and with ittheir steel sectors. How have steel industries beenfaring over the past year, and in comparison withthe last ‘boom yea’ of 2007?

Wold cude steel poduction eached 1.347billion tonnes in 2007, epots woldsteel, but fellslightly over the next two successive years as theeffects of the nancial cisis wee felt. Outputthen ose again to a new peak of 1.417 billiontonnes in 2010 and anothe ecod of 1.490 billiontonnes last yea. In the st fou months of thisyear, total production has risen again, but only by0.7% yea-on-yea, to 504 million tonnes. Thisslowing in the rate of increase can be tracedprimarily to a cooling of China’s growth, as itsdominant steel sector increased production by1.9% yea-on-yea in Januay-Apil, compaedwith a 10.3% incease ove the two yeas sinceJanuay-Apil 2010.

EU strugglesLooking at overall world totals, however, obscuresthe different market conditions betweenseparate regions and individual countries.Europe, in particular, has been faring more poorlythan other areas.

Steel output in the EU27 eached a peak of 210.2million tonnes in 2007, but plunged to a low of139.4 million tonnes in 2009 afte the nancialcrisis hit home. Production recovered in 2010 and2011, although remaining below previous levels.But as the euozone debt cisis has aed upagain, condence has been hit and steel

poduction has fallen again, by 4.2% yea-on-yea, in Januay-Apil of this yea.

All 27 EU counties – with the exception ofSlovenia – poduced less steel last yea than theydid in 2007. Even Gemany, the stongest egionaleconomy, poduced ove 4 million tonnes less lastyea than its 48.55 million tonnes of 2007.

In the st fou months of 2012, output fellyea-on-yea in all EU steelmaking countiesapart from Italy, France, Poland and the smallerproducers Slovakia, Hungary, Romania andSlovenia.

The EU as a egion – setting aside intenal tade– is usually helped by maintaining a positive

trade balance in steel: last year, exports of steelmill poducts wee 36.0 million tonnes andimpots 34.0 million tonnes, epots ISSB. Thetrade surplus was larger at 9.5 million tonnes in2009, but fom 2006 to 2008, impots exceededexpots. EU expots tend to be stable in the 30-36

million tpy range, while imports are more volatileand vary with home market conditions.

Although EU imports last year were down fromthei 2007 peak of 48.7 million tonnes, they stillmade the EU27 the wold’s biggest steel impote,ahead of the USA and South Korea. The region wasthe thid biggest expote, behind China (44.4

million tonnes) and Japan (40.3 million tonnes).Internal trade between EU countries is

substantial, and totalled 102.6 million tonnes lastyea. Gemany was both the top inta-EU expotewith 18.5 million tonnes and its top impote with24.2 million tonnes.

Asia, led by China’s 46% of global output,dominates steel production and consumption.China did not undergo any annual drop inproduction related to the credit crunch, andneither did India. China’s crude steel outputeached 683.27 million tonnes last yea, althoughsome Chinese sources believe that this is anundeestimate. China has ve out of the top ten

steelmaking groups in the newMetal Bulletin topsteelmakers list.India’s production just overtook South Korea’s

in 2006, and it has since stayed ahead. Last yea,India poduced 72.20 million tonnes and SouthKoea 68.47 million tonnes, epots woldsteel.

Japan’s poduction peaked in 2007 at 120.20million tonnes, but fell shaply to 87.53 milliontonnes in 2007. It has since patially ecoveed,although declining by 1.8% last yea to 107.60million tonnes. With its domestic economy stillsluggish, exports have been vital to the health ofJapan’s steel sector. It was the world’s leadingexpote in 2010 with 42.4 million tonnes.Volumes declined by 5% last yea to 40.3 milliontonnes, when Japan was the number twoexporter after China. The country maintains asubstantial steel trade surplus, however, sinceimpots ae geneally 4-5 million tpy.

Volatile exportsChina’s steel imports have been fairly stable overthe last ve yeas, geneally emaining at 1-2million tpm. It is the country’s exports that havebeen much more volatile, and sensitive tochanges in the state of domestic markets, such asthe government’s attempts to cool anoverheating property sector. The sheer size ofChina’s steel supply means that exports can

The changing face of steelSteel output in many counties has ecoveed afte the nancial cisis of2008, but in othes a etun to fome health is poving difcult.Steve Karpel reviews the state of the global industry in terms of production,international trade and demand

N U C O r



8 | Top steelmakers | June 2012

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Global review

June 2012 | Top steelmakers |9

sometimes surge: in the last 5 years they havevaied between about 1.0 and 7.8 million tpm atthe extemes, but have anged at the 2.0-4.6million tpm level since 2011.

In the Nafta region, neither US nor Canadiansteel poduction has etuned to 2007 levels, butMexican output supassed 2007 last yea. USoutput slumped damatically fom 98.1 milliontonnes in 2007 and 91.4 million tonnes in 2008to just 58.2 million tonnes in 2009. It has sinceecoveed to 86.2 million tonnes last yea, withpoduction ising anothe 9.2% yea-on-yea to30.92 million tonnes in Januay-Apil 2012.Canadian poduction ose 8.5% in this peiod.

Nafta does not produce enough steel to meetits normal demand and so has long been a netimpote. US impots peaked at 40.4 milliontonnes in 2006, fell to 14.3 million tonnes in2009, and have since inceased to 25.3 milliontonnes last year, according to ISSB.

Internal trade between the three Naftacounties totalled 18.1 million tonnes last yea,including 9.0 million tonnes of at-olled, 4.2million tonnes of long, 2.8 million tonnes oftube/pipe and 2.0 million tonnes of semis. Thiswas the second biggest year for internal Naftasteel tade afte the 19.1 million tonnes of 2008.

South America similarly suffered a substantial20.2% fall in poduction in 2009 to 37.78 million

tonnes, but recovered quickly so that last yearthe continent’s total steel output, at 48.36million tonnes, just exceeded its pevious 2007peak. South America’s steel is dominated byBrazil, whose production reached a new peaklast yea of 35.2 million tonnes, with a futhe

1.7% yea-on-yea gain in the st fou monthsof 2012.

The overall picture for the world’s steel trade isthat it has yet to climb back to the 2007 peak of304.7 million tonnes, although it is not fa shotat 290.5 million tonnes in 2011, excluding EUinternal trade (see table ). Flat-olled poductsremain by far the largest category ofinternationally traded steel at nearly one half ofthe total, followed by long products,semi-nished and tube.

The rapid rise of China’s steel production ispredominantly based on blast furnacetechnology, which explains why the world share

of integrated steelmaking has been steadilyrising over the last decade, even if total electricsteelmaking capacity has also been growing.Thus the integated shae has isen fom 58% in2000 to 66% in 2006 and 70% in 2011. Theelectric steelmaking share has slightlycontacted in this peiod, fom 34% to 32% andto 29% last yea, accoding to ISSB. The ‘othe’technologies in use, such as the obsoleteopen-heath funace, have shunk to 1% fom8% in 2000.

In its latest shot-ange foecast fo appaentsteel demand, released in April, worldsteelestimates that global steel use will ise 3.6% thisyea to 1.422 million tonnes (see table ). All regionsare forecast to increase steel demand in 2012except for the EU, which is seen as contracting by1.2%. The oganisation takes an optimistic viewthat the region will emerge this year from itsdebt cisis, with gowth esuming in 2013.

Eurofer, the European Steel Association, takes asimilar view, with its latest steel market outlookeleased in Apil foecasting a 0.6% contactionin the EU steel-weighted industial poductionindex this yea, followed by a 2.4% incease in2013.

It is notable that the two areas which haveshown particularly strong steel growth recently– Asia and the Middle East – ae foecast by

worldsteel to have the smallest increases of theegions outside Euope in 2012 at 3.7% and 3.5%,respectively. China’s demand is estimated togow by 4.0% both this yea and next.

Demand potentialApart from national totals for production anddemand, one of the most revealing statistics forthe steel sector is consumption per capita, whichindicates how far below or above the globalaverage each country is, and thus gives ameasure of potential future demand growth.The wold aveage fo nished steel appaentconsumption pe capita was a ecod 206 kg in2010, according to worldsteel, but, as would beexpected, there are wide variations betweencountries.

The EU average was 299 kg, but it had been ashigh as 409 kg in 2007. In 2010, the leadingEuropean consumers per capita were the Czech

republic (541 kg), Gemany (467 kg) and Austia(445 kg).

One county has suged ahead of the est:South Korea’s demand per head has been aleader over the last decade, pulling ahead ofJapan and Taiwan. It soaed fom 787 kg in 1995to 1,211 kg in 2008, boosted by its powefulautomotive and shipbuilding industries. After abief dip to 936 kg the following yea, it esumedits upwad tend to 1,077 kg in 2010. Thesecond-highest consumption pe head wasTaiwan with 772 kg.

China has shown a pronounced uptrend indemand per capita, with a steady unbroken risefom just 72 kg in 1995 to 427 kg in 2010. On theway, it has ovetaken the wold aveage in 2003,russia in 2004, the USA in 2009, and the EU27average in 2009. The country’s apparentconsumption per head is now up among theworld’s highest, which raises the interestingquestion of how much further it is likely to rise,and whether it is about to reach a moresustainable lower rate of demand growth.

India, in comparison, still lags at some 55 kg/capita demand. With its population sizeapproaching that of China, it evidently has thepotential for substantially greater steelconsumption, and fo becoming a China-stylehotspot for steel in future.

GLOBAL STEEL TRADE*

2007 2008 2009 2010 2011Flat 143.2 137.2 111.2 138.5 144.9Long 71.9 69.4 51.4 55.9 60.7Semis 57.1 56.7 48.7 52.8 50.5

Tube 32.5 35.3 24.1 28.2 34.4Total 304.7 298.6 235.4 275.4 290.5*million tonnes. EU internal trade is excluded. Source: ISSB

INTER-REGIONAL AND INTERNALSTEEL TRADE IN 2011*

Bloc Exports Imports InternalEU27 36 34 103CIS 47 5 10Asia 50 20 92NAFTA 6 23 18South Ameica 10 8 4MENA 2 40 na*million tonnes, rounded. Source: ISSB

FORECASTS FOR APPARENTFINISHED STEEL USE*

Region 2011 2012f 2013f EU27 152.8 150.9 155.8Othe Euope 33.0 35.0 37.2CIS 54.0 56.2 59.1Nafta 121.2 127.5 134.0Cental/S Ameica 46.0 49.1 52.5Afica 22.7 25.1 28.2Middle East 48.1 49.8 53.0Asia & Oceania 895.5 928.6 966.0World 1,373.3 1,422.3 1,485.7*million tonnes. Source: worldsteel, April 2012

CRUDE STEEL PRODUCTION*

2007 2010 2011 2011 2012Jan-Apr Jan-Apr

EU27 210,179 172,630 177,431 61,415 58,831Othe Euope 30,608 33,595 37,181 11,878 12,717

CIS 124,169 108,200 112,434 37,789 36,831Noth Ameica 132,618 111,406 118,927 39,137 41,874South Ameica 48,232 43,873 48,357 15,905 16,058Afica 18,675 16,621 13,966 11,556† 11,505†

Middle East 16,452 19,590 20,325 na naAsia 756,861 903,201 954,190 319,733 324,012Oceania 8,783 8,149 7,248 2,798 2,131World 1,346,577 1,417,264 1,490,060 500,213 503,958*’000 tonnes. † Africa + Middle East. Source: worldsteel





Regional reports

Chinese capacity climbsfurther stillIt is the best of times but also the worst of timesfor Chinese steel producers, who have eithergone full steam ahead on production or have

suffered the downturn in market prices over thepast 18 months – sometimes both. Chinesesteelmakers have been driven by governmentpolicies and economic plans in adjustingproduction and implementing strategies.

Crude steel output continued to see robustgrowth in 2011, despite tightening economicmeasures and strict regulations on the realestate sector since the start of the year. Outputwould have been higher still over the past year ifthe housing market had been allowed to growuncontrollably.

High-speed railway construction halted lastsummer when an accident occurred in South

China’s Zhejiang province, which weakeneddemand for steel a little. China’s monthly crudesteel output retreated after peaking in May 2011.

With demand from those two major driverstrimmed, steel mills’ production levels havebeneted instead from the construction ofaffordable houses, city subway systems, otherrailway projects and infrastructure construction.

China added 283 km of subway to reach 1,630km and the country plans to expand to 3,000 km

by 2015, according to the China City MetroAssociation. It is also fortunate that thegovernment continued to encourage expansionof the automotive sector last year, whichbolstered the consumption of steel. Total

Chinese automobile output and sales reached18.42 and 18.5 million vehicles, respectively, in2011 – an increase of 0.8% and 2.5%, accordingto the China Association of AutomobileManufacturers.

Slowing growthChinese steelmaking capacity is still growing in2012, although markets remain lacklustre andeconomic growth has slowed down.

China’s economic growth slowed to 8.1%year-on-year in the rst quarter of this year –the lowest quarterly growth for nearly threeyears – as domestic consumption and

investment have cooled. The government hasset an annual growth target of 7.5% year-on-year. Nevertheless, most market participantsbelieve that the government will continue tosupport the development of the steel industry.For example, ofcial approval of Baosteel’s 10million tpy project in Zhanjiang and WuhanSteel’s Fangchenggang steelworks will shift thefocus to South China.

Many Chinese steel mills actually still want to

expand capacity and are reluctant to trimproduction to a reasonable level afterthey found recently that the central governmentin Beijing has put forward another round ofstimulus measures.

China’s State Council of government ministerssaid in early May that it planned economic policyadjustments to promote domestic demand andcurb “increasing pressure of a downwardmovement.” Premier Wen Jiabao led a cabinetmeeting that resolved to focus on maintaininggrowth through “pre-emptive policyadjustments and ne-tuning more forcefully.”

In mid-May, the State Council announced aone-year 26.5 billion yuan subsidy programmeto encourage purchases of energy-efcientappliances. A similar move was made in 2008 toboost domestic consumption and supportindustries that are traditionally export-

oriented.The Chinese government has also taken steps

to boost private investment into sectors such asrail, healthcare and energy, which are state-dominated, and particularly to accelerateprivate investment in infrastructure.

Though the state-run Xinhua News Agencysaid on 29 May that China has not got plans for alarger economic stimulus, current measures,smaller than those put forward in early2009, could also help cushion the economy andprovide reasonable demand for steel.

The tone of China’s leaders is now changingfrom continuing anxiety over ination and theproperty market to concern about maintaininggrowth. It consequently seems highly probablethat China’s major steel mills will boostproduction in the coming months through to2013.

Record output inLatin AmericaSteelmakers in Latin America faced an optimisticand prosperous start to 2011 but ended the yearfull of uncertainties. Overall the balance waspositive. Crude steel production reached anall-time record of nearly 67.8 million tonnes, up10% from 2010 and almost 1% from the previous

Around the regionsIn a global industry, no steelmaker is an island – each is affected by thefortunes of its host nation, or nations, while complex international tradepatterns for raw materials and steel products can also have a greatinuence. Here Steel First’s worldwide network of steel journalists reviewthe key factors impacting producers in their regions

While China’s economic growth is slowing, the government is taking a number of measuresthat should support steel demand. Plate mill capacity has already seen investment

D A N I E L I




high of 67.2 million tonnes in 2007, according tothe latest gures from Alacero, the region’s steelassociation.

Apparent consumption of nished steelproducts cooled in the second half of the year as

a result of governmental measures to hold backination in some countries in the region.Worries about the eurozone crisis and aslowdown of the global economy on a widerpicture became additional factors.

The total amount of steel consumed in theregion’s seven biggest economies – Brazil,Mexico, Argentina, Colombia, Venezuela, Chileand Peru – was expected to increase to as muchas 63 million tonnes, but wound up at 59.1million tonnes, a modest 2.2% year-on-yearincrease.

With high raw materials prices, strong steelimports, demand weakness in several end-usesectors and lower bargaining power over prices

in their domestic markets, most Latin Americansteelmakers had to cope with squeezedoperational margins. Production and sales weregenerally up, however.

Brazil-based Gerdau, which has the biggestinstalled capacity for crude steel in the wholeregion, reported an output of 19.62 milliontonnes in 2011, up from 17.8 million tonnes in theprevious year. Sales hit a record volume of 19.16million tonnes.

Techint, the Luxembourg-based holdinggroup that controls steelmaker Ternium andpipe manufacturer Tenaris, saw its crude steeloutput increase from 8.84 million tonnes to 9.5

million tonnes. Ternium, whose mainoperations are in Argentina and Mexico, did notreport its production gures, but highlighted a10% rise in nished steel sales to 8.8 milliontonnes.

Mexico’s largest integrated steel mill, AltosHornos de Mexico (Ahmsa) registered historichighs of 3.8 million tonnes of crude steel outputand 3.37 million tonnes of sales. And Sidor, theVenezuelan state-run steelmaker whichsuffered in 2010 because of a national powersavings programme, reported a productionboost of 36% last year to 2.45 million tonnes.

Of all the Latin American companies whoappear inMetal Bulletin’s Top Steelmakers 2011list, only two – both from Brazil – registeredcrude steel output decreases.

CSN, which is becoming increasingly strong iniron ore, reported a slight contraction to 4.87million tonnes from 4.9 million tonnes in 2010,which indicates stability rather than reduction.

It was a different situation for at steelproducer Usiminas, one of the region’s steelproducers most affected following the2008/2009 global nancial crisis. Withcombined capacity to produce around 9.5million tpy of crude steel at its two mills in Brazil,the company did not produce more than 6.7million tonnes in 2011 – mainly because of

reduced market share in the domestic market. In2010 the company’s crude steel output hadreached 7.29 million tonnes, matching thecompany’s 7.2 million tpy rolling capacity for atsteel products.

Mining and competitionUsiminas passed through a turbulent year which

began with CSN buying shares to enter into itscontrolling group, and ended with a 5 billionReais ($2.48 billion) deal which gave Ternium a27.66% stake in the company.

The move frustrated CSN’s ambitions tobecome an even stronger player in the Brazilianand Latin American steel markets. The companyis already, and by far, the most successfulsteelmaker investing in iron ore mining in theregion, with annual sales above 20 milliontonnes over the past few years at high prices. In2011, iron ore sales increased by 16% to 29.3million tonnes, with CSN targeting a salescapacity of 89 million tpy in the medium term.

Now almost everyone else has been followingthe trend and investing not only to becomemore self-sufcient in iron ore, but to startselling surplus output of the raw material andget more revenues in uncertain times forsteelmakers.

In the medium term this will probably meanhigher crude steel production in Latin America,as long as the global economy does not worsenin the second half of this year. Countries such asBrazil have already been taking aggressivemeasures to stimulate local consumption andgrowth, such as cutting interest rates,introducing tax and credit incentives, andimplementing monetary policies to weaken

local currencies and boost exports.According to Alacero’s latest estimates,

compiled in April, the region’s seven maineconomies are expected to produce 63.75million tonnes of nished steel in 2012, up from60.22 million tonnes in 2011. Out of this total,30.15 million tonnes would be produced in therst half of the year and 33.59 million tonnes in

the second half, which indicates an expectedgradual recovery through the next few months.

Apparent consumption in those samecountries is estimated to reach 62.79 milliontonnes this year, up from the 59.1 million tonnesin 2011.

Juan Weik, Sao Paulo, Brazil

North America addressessome imbalancesWhile still a bit volatile and experiencing adegree of overcapacity, North American steelmarkets – and the USA’s in particular – are someof the strongest at present. This can be seen bythe movements in output by both the majorsteelmakers based in North America and thosewith large subsidiaries in the region.

“The North American steel market still has along way to get out of the malaise from theeconomic downturn, but it is continuing tomove in the right direction,” says ChristopherPlummer, managing director of Metal Strategies,West Chester, Pennsylvania, calling it one of thebright spots internationally in 2012.

US steelmakers’ capacity utilisation rates,which while falling back a little in the past fewmonths, were at their highest levels since theonset of the recession during the rst quarter

Although Latin America saw record crude steel production in 2011, total demand in the sevenbiggest economies in the region was below expectations

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Regional reports


of 2012. John Surma, chairman and chiefexecutive ofcer of United States Steel,Pittsburgh, which holds the No. 12 position inMetal Bulletin’s Top Steelmakers 2011 ranking– the same position that it held in 2010 despite

a small decline in crude steel output – says thathis company’s capacity utilisation rateexceeded 90% at its US at-rolled steel andtubulars facilities during that quarter.

Some other top steelmakers in the region alsoachieved strong capacity utilisation in the rstquarter, although perhaps not quite at the90% rate, while others, and particularly thoseproducing special bar quality steel, which wason allocation or controlled order entry until veryrecently, are still running full out.

John Ferriola, president and chief operatingofcer for Nucor, Charlotte, North Carolina,which remains in the top 20 onMetal Bulletin’sTop Steelmakers list for 2011 with a 7.1% increase

in steel output, says that overall the company,which is very diversied as a mini-millproducer of both at and long products, had anoverall operating rate of 79% during the rstquarter of 2012, pushed up by “very healthy”utilisation rates for sheet and plate.

US crude steel output at the end of May wasup by about 10% from a year earlier, resulting inan operating rate of 78.6%, by comparison with74.1% a year earlier.

There continues to be slow but steadyeconomic recovery, according to JamesWainscott, chairman, president and chiefexecutive ofcer of AK Steel, West Chester, Ohio,

which achieved a small increase in steel outputlast year.

Patchy recovery Recovery in steel demand has been bifurcated,points out Richard McLaughlin, practice directorat Hatch Beddows, with automotive, energy,yellow goods and other transportationequipment on the upswing while theconstruction sector continues to be weak,although moving up very slightly from thebottom.

Wainscott says that North Americanautomotive output has exceeded expectations.Plummer says that production of light vehiclesshould be greater than 14 million vehicles thisyear and could exceed 15 million units in thenext year or two, pushed up by pent-updemand despite the still shaky state of theeconomy. That is up from 13.1 million in 2011 and just 8.6 million at the depth of the recession.

Energy markets are seeing even moreimpressive growth this year, says Plummer,with line pipe shipments up 31% year-to-datethrough April by comparison with the rst fourmonths of 2011, and shipments up by 35% inthe same comparison. Much of this is comingfrom the shale plays, particularly for oil. Therehas been a 44% year-on-year increase in

drilling for oil as of the beginning of June,according to Baker Hughes, Houston, whiledrilling for natural gas fell by 34%.

Nevertheless, Surma says that while mildwinter weather positively impacted theconstruction sector in the rst quarter, overalldemand there remains relatively weak. Just

how weak varies, says Plummer. Housebuilding– the smallest steel-consuming constructionsector, but the one that tends to lead the others– was up by 9.2% year-to-date through April,on the heels of a 26% increase in 2011, butremains 75% below its 2005 peak, Plummersays. Non-residential construction, the largeststeel-consuming sector, is just starting to see aslight pick-up, rising 6.8% year-to-date bycomparison with a year earlier, after declining3.2% in 2011.

There has been a big ramp up in productioncapacity, especially for at products, with muchof that going to support expected futureincreases in the automotive market, AmyBennett, principal steel consultant for MetalBulletin Research, says.

In addition to the ramping up ofThyssenKrupp’s new mill in Calvert, Alabama,Severstal has made signicant investments atits Severstal North America Dearborn, Michigan,and Columbus, Mississippi, facilities.

RG Steel LLC had restarted capacity in SparrowsPoint, Maryland, which it acquired fromSeverstal, but now, after ling for Chapter 11bankruptcy protection, is winding down itsfacilities, and is expected to idle them all,except for its joint ventures, this month. Aspokeswoman says that the company is seeking

buyers for all or parts of the company.“The future is very hazy,” McLaughlin says,

noting that everyone is anxious about what ishappening in Europe and what that will meanto the North American market. A lot alsodepends on what happens with the USpresidential election, the Bush era tax cuts and

funding for infrastructure construction, CharlesBradford of Bradford Research, declares. “Itisn’t that things are all that bad, but there are alot of imbalances that need to be taken careof.”

Myra Pinkham, New York, USA

Pressures mount inEurope into 20122011 was a tough year for European steelmakerswith the back end of the year dominated bynervous consumers deliberating over whetheror not to book material, mills contemplatingcutbacks and miners and raw materialsuppliers suffering from the fall-out.

The rst half of the year was relatively strong,but the last six months took a toll on many ofthe most established steelmakers in the world,with production aimed at matching supply todemand.

This is not wholly apparent from the 2011output gures, however, with the bulk of thetop 100 steelmakers based in Europe showingpositive production gains.

Headquartered in Luxembourg, the world’sbiggest steelmaker ArcelorMittal increased itsproduction by a little over 1.3 million tonnes toreach 91.9 million tonnes in 2011.

The USA has ramped up its capacity, especially for at products, because of demandexpectations – particularly from the automotive sector

U S S T E E L



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Iron & Steel Works of the World 2012

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Regional reports


Lakshmi Mittal and the ArcelorMittalmanagement outlined back in September anasset optimisation plan that was intent on saving$1 billion by refocusing its steelmaking away from

higher cost facilities and increasing output at itslower-cost and higher-margin operations.

It temporarily cut production at its furnaces inSpain, Poland, Luxembourg, Germany andBelgium in the second half of 2011, yet thesteelmaker still produced more steel than it didin 2010, a fact that will surely be used as evidenceof its optimisation plan.

ThyssenKrupp was also not immune fromenforced production curbs. The steelmakerannounced that it would take out 500,000 tpy ofat rolling capacity in Europe during the lastquarter of the year.

Despite this, the company produced 17.9million tonnes of steel in 2011, up from 16.7million tonnes in 2010. The comparative strengthof the rst half of 2011 was enough to support theGerman steelmaker’s 2011 results.

The Riva Group in Italy also made output gains,despite suffering unplanned shutdowns duringthe year, making 16.08 million tonnes of crudesteel in 2011, up from 14.01 million tonnes a yearearlier.

Fourth-placed European steelmaker was theTechint Group, which produced 9.5 milliontonnes in 2011, up from 8.84 million tonnes in2010. Headquartered in Luxembourg, itcomprises Latin American at and longsproducer Ternium and tubemaker Tenaris,

among its other companies, with the group’sworldwide locations allowing it to increaseoutput.

Spanish-headquartered Celsa, which mostly

produces steel products for the constructionindustry, made a slight gain too, increasingproduction to 7.83 million tonnes last year,compared to 7.37 million tonnes the yearprevious.

Celsa also curbed output towards the end ofthe year and with its long products marketstruggling at the moment, 2012 could reverse2011’s trend.

German company Salzgitter also made gains in2011, producing 7.26 million tonnes of steel in2011, compared with 6.75 million tonnes theprevious year. It cut its hot strip steel output by10% in the last quarter of 2011, yet, as of March, itsaid that it had restored its output to 100%.

Austrian ats and longs producer voestalpinealso took production out of the system in 2011.After a controversial investigation into its raildivision sales, it closed down its Duisburg railfacility, while it also cut its at productsproduction by 10% in the last quarter of the year.

In the face of this, the Linz-headquarteredcompany made 7.06 million tonnes of crude steelin 2011, up from 5.82 million tonnes in 2010.

Special steel manufacturer SSAB made lesscrude steel in 2011 after it idled its larger blastfurnace at Oxelosund, Sweden, back in July. TheSwedish company’s output dropped by 129,000tonnes to 5.67 million tonnes in 2011.

Duferco also cut its production in 2011,producing 3.82 million tonnes of crude steel,down from 4.06 million tonnes in 2010. It sold its50% stake in the Clabecq and La Louvière mills inBelgium in July, before at steel production at the

mills was reduced in October.Just outside of the top 100, Belorussian SteelWorks (BMZ) made 2.67 million tonnes last year,up 140,000 tonnes from the 2.53 million tonnes itmade in 2010.

There were also increases in 2011 for DillingerHuttenwerke (110), AFV Acciaierie Beltrame SpA(111), Vallourec (120), Badische Stahlwerke (125) andFeralpi Siderurgica (126).

Slight cuts were seen at Rautaruukki (121) andstainless producer Acerinox (128), though.

Crisis of condence

As we approach the second half of 2012 the crisisover the eurozone is still the key issue for

steelmakers headquartered in the continent.Through every part of the steel chain, there is alack of condence. Steelmakers are working on aback-to-back basis, buying raw materials onlyafter securing sales at the other end.

In between the consumers and mills,stockholders are struggling to get nancing,which means that inventories are being kept atminimal levels.

In the face of these pressures, cuttingproduction to match apparent demand has notbeen as easy as steelmakers would hope for.

Politicians have tried to ensure that steelworksare kept open and people are not made

redundant. The outgoing president of France,Nicolas Sarkozy, met with Lakshmi Mittal back inMarch of this year to try to ensure the 5,000-plusemployees at Florange kept their jobs, in oneinstance of state intervention.

With demand in the rst half of 2012 seeminglyweakening in Europe, these political factors couldplay a key role in this year’s crude steel output.

With two of the major stainless producers inEurope, Outokumpu and Inoxum(ThyssenKrupp’s stainless steel spinoff) hoping tocomplete a merger by the end of this year, couldthis also result in output reductions?

And how far will ArcelorMittal’s ‘non-core’disposal go? Can the European constructionindustry get any worse?

All these questions will have a bearing on thisyear’s gures, yet unlike 2011, steelmakers havenot been able to count on a strong start to a yearthat they usually are able to.

Daniel Gleeson, London, UK

Russian steelmakers bracefor tougher timesRussian steelmakers have faced a soberingenvironment in the last ve months, which hascome as a contrast to the lavish domestic demandfor both at and long products and the

Many European steelmakers have been forced to cut production owing to weak demand A R C E L O R M I T T A L



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Regional reports


favourable conditions in their traditional exportmarkets in 2011.

Russian steel producers are preparing for eventougher times as the country is set to enter theWorld Trade Organization later this year, which

will bring in cheaper imports of steel productsand boost transport and gas tariffs in the comingyears, according to the market analysis note thatRussian pipe- and steelmaker OMK published lastmonth.

Russia’s steel market is largely divided betweenthe ve big privately-owned players: Evraz,Severstal, Novolipetsk Steel, Magnitogorsk Iron &Steel Works and Mechel. They saw high demandboth domestically and abroad in 2011. On thedomestic market, the demand for steel wasdriven by the pipe-makers who were getting bigorders from Gazprom, the state-run gasmonopoly, and Transneft, the state-run pipelineoperator.

There was also a booming construction sector.Demand in the long steel market was so goodthat some steelmakers which traditionallyconcentrated on at steel boosted their longproducts output. Magnitogorsk Iron & SteelWorks, for example, raised its 2011 long steelproduction by 41% to 1.5 million tonnes.

“In 2011, demand in construction was strongdue to great activity in the private sector, as wellas the orders for the big state-run infrastructureprojects, including the construction of facilitiesfor the winter Olympics in Sochi in 2014,” saysRenaissance Capital analyst Boris Krasnojenov.

The demand for both long and at products has

been slow so far this year, as the nancing forsome construction and industry projects wasdelayed due to the early-March presidentialelections that brought Vladimir Putin back to theKremlin.

The oil price factorWhether the demand for rebar will come back togrowth this year, will depend on the price of oil,analysts say. “As long as the oil price is above $100a barrel, there will be a good demand for rebar inRussia,” Krasnojenov notes. “In such a situation,the government has money to spend oninfrastructure, while the oil revenues also spreadaround the system, resulting in a generally higherdemand in construction.”

The Brent crude price fell below thepsychologically important $100 per barrel earlierthis month, in a sign that the hopes for a strongconstruction season in Russia may not be realisedthis year. Gazprom and Transneft have not startedany big new projects this year, pushing thepipemakers to look for the demand in themarkets of other CIS states.

The situation has not been any more favourablefor Russia’s steelmakers in the European andMiddle Eastern markets. The tense economicsituation in the eurozone has been keepingdemand at bay and pushing prices down, while

Iran, a key CIS at steel consumer, has faceddifculties with paying for imported steel aftermore stringent sanctions, spearheaded by the EUand USA, were introduced earlier this year. Thus,CIS steelmakers have had to re-direct export

volumes homewards and to the Black Sea exportmarkets, creating an oversupply and pushingdown domestic prices.

Neither have steelmakers’ lives been any easieron the costs side. “Russian steel mills’ globaldominance in terms of efciency is a thing of thepast, as the non-raw material components oftheir cost base are increasing,” RenaissanceCapital analysts reported last month; “Steelmargins, on a standalone basis, are depressed,meaning that Russian steel majors must rely ontheir mining assets and vertical integration.”

Costs are set to rise further in the next two years,as WTO membership will bring in higher railwaytariffs and more expensive gas on the domestic

market, according to OMK’s May research note.A big role in the supply and demand equation

for Russian steelmaking in the long term will beplayed by the state, analysts say. “It is up to thegovernment to set up more infrastructureprojects, build more machinery and shipbuildingplants or other metal-intensive productionfacilities,” says Krasnojenov. “It is important tocreate new consumers of at steel, as a demandceiling for the material’s domestic consumptionhas been reached,” he adds.

Magnitogorsk Iron & Steel has pointed to thekey drivers of domestic steel demand in amid-term perspective: the construction of

facilities for the Sochi Olympics of 2014 and theWorld Football Championship of 2018, thelocalisation of car component production byforeign carmakers producing autos in Russia, aswell as higher defence spending and the

construction of roads and bridges.Nadia Popova, Moscow, Russia

Ambitious plans and politicalturmoil in Mena The Middle East and North Africa (Mena) region’ssteel industry largely remains one of futurepotential rather than present strength in a globalcontext, despite rapid growth in some key areas.

The aftermath of the ‘Arab Spring’ created anuneven landscape, with some countries’production and expansion largely unaffected,but others near-paralysed.

Turkey, Europe’s second largest steel market but

often considered Middle Eastern culturally,showed last year why it is a steel industry unlikeany other in the region.

Six of the nine Mena companies to breach thetop 128 steelmakers come from Turkey. Indeed,such a decentralised steel industry could accountfor the fact that, while it has a number ofdecent-sized producers, it has not yet produced acompany whose scale could penetrate theworld’s top 20. As such, Eregli-based Erdemirleads the region at 49 (7.47 million tonnes), Içdasat 73 (4.22 million tonnes), Isdemir at 74 (4.10million tonnes), with the others at lower outputsbetween positions 97 and 118.

State investment will play a major role in Russia’s future steel demand N L M K




Regional reports


Much of Turkey’s output for both domestic andexport sales has traditionally been in rebar,providing the backbone for the country’s steadyconstruction projects as well as the large scalebuilding plans in the UAE and other Gulf

markets.Erdemir, along with its subsidiary Isdemir, wasa dominant domestic supplier of at productslast year, despite competition from Colakoglu– which started hot-rolled coil output only in2010 – and MMK Atakas. Habas is said to bewaiting in the wings this year to also begin coilproduction.

Debate continued over the last year as to whenTurkey will become a net exporter of atproducts to compare with its internationalcompetitiveness for long products. The countryhas had a sluggish rst half of 2012, withdemand waning from its major consumerindustries such as white goods and cars, as a

knock-on effect of declining demand for suchconsumer products from Europe.

National champions are instead to be found inthe Arab world’s two largest countries, though

similarities are not plentiful when it comes torecent development.

Hadeed, the steel producing arm of SaudiBasic Industries Corporation (Sabic), has risen tobecome a dominant supplier in the Gulf. The

company, as with the parent, typies thebillions of riyals spent by Saudi Arabia todiversify its economy with the swiftdevelopment of various industries. When theKingdom invests, it tends to do so in a big way:Sabic itself – mostly government owned – is thebiggest Gulf company by market capitalisation.

Egypt’s Ezz Steel has a longer pedigree but hashad a challenging year that may have posed therst questions about its future dominance ofthe region. The arrest and sentencing of AhmedEzz removed the gurehead of what hadbecome a major regional steelmaker, althoughthe effect was less signicantly adverse thanchanging market forces.

Declines in steel demand and prices in the lastyear have combined with rising competition forEzz Steel. Domestically, the company felt theinevitable effects of an economy put briey on

hold from a civil revolution and its aftermath.But its size and status as one of the few truesteel ‘brands’ should see its competitivenesscontinue.

That there are still relatively few companies

from Mena making the list may be down to theindustry’s relative youth. Iran, with itsnumerous mills, contributes a single stateholding group, Imidro, which has several majorsubsidiaries including Esfahan and MobarakehSteel. But the many current expansion projectsstarted as the country looks towardsself-sufciency, could see more companiesmaking the list in the future.

New projects on trackThe Mena region developed further in the pastyear. The UAE’s Al Ghurrair Iron & Steel andEmirates Steel Industries remain two companiesstriving to increase their competitiveness, the

latter giving timelines for its plans to producehot-rolled coil and plate in the coming years.

Qatar Steel also saw its regionalcompetitiveness increase, with numeroustraders citing its competitive products andservice. Its joint venture with Qatar Mining tobuild a steel plant in Algeria is an example ofthe multinational investment to meet growingdemand for international-grade products.

The Kuwaiti-Japanese joint venture Sulb inBahrain will also add to the long productssupply strength, particularly with the launch ofits new 1 million tpy meltshop this year that willmake it self-sufcient in billet and allow

expansion of its nished products plant inJubail, Saudi Arabia.

Saudi Arabia overall seems ripe for furthersteel projects across the production chain,reducing its reliance on imports. It is perhapsthe most insulated of the Mena countries fromthe continuing regional instability, which islikely to be a critical factor for trade ows andthe success of expansion projects. Kandil Steel,for example, a fast-growing Egyptian coilmaker, has slowed its expansion project in thelight of both domestic and regional uncertaintythat has affected the viability of the project.

Instability in the Eurozone will also affectMena mills in two ways. Firstly, the weakerdemand for consumer goods bought in Europeand made using Middle Eastern steel products.Secondly, sluggish growth and a weaker euromay keep European mills competitive as asupplier to the Mena region. In addition,continuing sanctions on Iran may affect thecountry’s investments in meltshops and rollingmills, as well as affect exports from itstraditional suppliers such as Turkey and the CIS

But if conditions improve and Mena projectsstay on track, 2013 could see further gains for theregion as an international steel force.

Ben Roberts, Dubai, United Arab Emirates

The Gulf region in particular has been a focus for major steel investment E M I R A T E S S T E E L / D A N I E L I



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