Steel market and SSAB’s position
Steel industry dynamics are shaped by global trends in steel demand, steel supply capacity, steel trade flows and the raw material markets. These in turn are influenced by global megatrends such as climate change and resource scarcity, population growth, urbanization and digitalization. Since SSAB is a relatively small player in the global steel industry in terms of production capacity, we have specialized in certain segments within carbon flat steels.
Four fundamental forces shaping steel industry dynamics
1. Steel demandSteel demand has grown for several years and the long-term outlook is positive
Global annual carbon steel consumption is estimated to be around 1.6 billion tonnes in 2018. From 2013–2018, consumption of carbon steel has grown about 8% per year, and the long-term demand outlook remains positive.
Over the past few decades, China and other developing countries have accounted for a large share of steel demand growth. Today, China is the largest regional market with a share of almost 50%. Europe accounts for approximately 13% and NAFTA for approximately 9%.
However, demand growth from China has decelerated in recent years and is expected to remain stable during 2019 as China has entered into a new, less steel intense phase of growth. At the same time, high economic confidence, strong investment levels and an improved business environment in steel-using sectors together with a recovery in commodity prices have driven steel demand globally both in developed and developing economies. In October 2018 Worldsteel forecast that global steel demand will grow 1.4% in 2019.
Innovation toward productivity and sustainability will drive new steel demand
As in all industries, it is important for steel companies to adjust their product offering to customer needs. Users in, for example, the construction and automotive industries are working to lower costs, improve safety and lighten the weight of their products. In the mining industry, customers are striving to increase the durability of equipment and reduce downtimes. These trends have led to a growing use of high-strength steels, which provide advantages in the form of stronger, lighter and more durable steel solutions. This means the growth potential for high-strength steels continues to be higher than that for standard steels.
2. Steel supply capacityOvercapacity regionalizating
Despite extensive consolidation activity over the past 20 years, the global steel sector remains relatively fragmented. Steel production capacity in China and the rest of Asia has increased significantly during past decades. Today, with ~50% of the world’s steel production, China is the world’s largest single producer of steel, followed by Japan, India, the US and Russia. Excess steel production capacity, especially in China, and to a lesser extent in Europe, has been impacting steel industry dynamics since the financial crisis of 2008. Although the situation has improved somewhat, there is still latent overcapacity globally. However, this overcapacity is increasingly focused around China and the rest of Asia. In recent years, Chinese authorities have worked actively to improve the situation through consolidation and capacity downsizing. The US on the other hand is an undersupplied market, where imports satisfy around 30% of the steel demand. Global steel capacity utilization improved in 2018 to around 78%.
3. Steel trade flowsChanging trade policies and market regionalization
The imbalance in supply and demand has led to growing export volumes into Europe and the USA. Extra-regional steel trade (i.e. excluding trade within the EU, NAFTA, CIS, etc.) accounted for 17% of global steel demand in 2017, with China being the largest exporter, and the US the largest net importer.
Global trade patterns have been much analyzed and debated in recent years, resulting in more and more countries installing protection mechanisms. Trade policies combined with increasing steel demand locally have resulted in falling trade. Most notably Chinese steel exports fell 8%, from 75 million tonnes in 2017, to 69 million tonnes in 2018. The US remains the largest net importer of steel, with a trade deficit of ~25 million tonnes and has introduced Section 232 tariffs on most imported steel materials. The EU and others have responded with retaliatory measures. Current trade policies will likely be in force for a number of years, and more may be introduced if perceived necessary or real predatory trade practices continue. As such, they may dampen economic growth prospects, and/or hinder exports of niche materials, but should on the other hand be supporting steel prices in home markets.
4. Raw materialsPrice volatility of raw materials has increased
Steel production requires substantial quantities of raw materials, including iron ore, scrap metal, metallurgical coal, injection coal, coke and alloys. Raw material prices are thus important drivers for the steel industry. Raw materials are priced in the world market and the prices, which are primarily quoted in US dollars, generally vary depending on demand for steel. Price volatility has increased in recent years and is primarily due to fluctuating customer demand globally, supply shortages of raw materials and price speculation.
Steel demand, steel supply capacity, steel trade flows and raw materials all impact the sales prices of steel products globally. Steel prices have been increasingly volatile and unpredictable in recent years, which reflect the turbulent development of the underlying four factors.
SSAB’s steel market position
SSAB is present in the steel segment commonly referred to as flat carbon steels, i.e., steels with a particular carbon content rolled into flat sheets or plates. With annual steel production capacity of approximately 8.8 million tonnes, SSAB is a small player in the global carbon steel market. This is why SSAB specializes in and focuses on four defined segments within flat carbon steels, where we have strong market positions:
- Flat carbon steel and tubes in the Nordics
- Heavy plate in North America
- Automotive premium steel (Advanced High-Strength Steel, AHSS) globally
- Special steels (Quenched & Tempered, Q&T and AHSS) globally
SSAB has leading positions in our Nordic and North American home markets. SSAB has an overall market share of around 40-45% for flat carbon steels in the Nordic region. In North America, SSAB is the largest producer of heavy plate, with market share approaching 30%. With our leading products, brands, knowledge and well-invested asset base, SSAB also holds the number one position in the global market for Quenched and Tempered (Q&T) plate and strip and in selected Advanced High-Strength Steel (AHSS) segments.
These market segments account for about 3% of the global market for carbon steel. In addition to being a steel producer, SSAB is also a steel and non-ferrous metal distributor via our subsidiary Tibnor and offers steel-based construction solutions through our subsidiary Ruukki Construction.
The main customer segments served by SSAB include heavy transport, construction building and infrastructure, automotive, industrial applications, construction machinery (including lifting), energy and material handling (including mining). In our home markets, the Nordic region and North America, standard steels are, to a large extent, sold through steel service centers and distributors.