Improved balance in capacity and demand
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. However, apparent demand and effective capacity have become more balanced in recent years. The Chinese authorities have worked actively to improve their domestic situation by stimulating demand, driving consolidation and downsizing capacity, effectively removing more than 130 million tonnes of crude steel capacity in recent years.
The US, on the other hand, remains an undersupplied market, where imports satisfy around 30% of the total steel demand. However, due to favorable market conditions, US steel manufacturers have started to increase domestic steel capacity, which is expected to come online in the next few years. Capacity expansions are also taking place in many developing economies as those countries start to industrialize more. Meanwhile, demand-capacity was in balance for most of 2018 and 2019, but as apparent demand in Europe decelerated in 2019, major steel producers, including SSAB, adjusted their production levels by idling steelmaking capacity. Supply landscape transformation
Despite extensive consolidation over the past 20 years, the global steel sector remains relatively fragmented. Further attempts to drive consolidation have been made in recent years with varying success. Major European steel producers ThyssenKrupp and Tata Steel Europe attempted to form a joint venture in 2019, but were unable to obtain competition clearance from the European Commission.
ArcelorMittal acquired Italy’s biggest steel maker, Ilva, but in 2019 some issues arose regarding the legal protection designed to protect ArcelorMittal’s liability related to a clean-up plan for the plant and discussions with the Italian government are still ongoing. Consolidation can also be noted in the Chinese market.