Steel market and SSAB’s position

Following the Covid-19 pandemic, the global steel industry experienced a recovery during 2021 to activity levels not seen since the financial crisis of 2008. Steel prices climbed globally because of good steel demand, restricted supply availability and continued regionalization with falling global steel trade.

Four fundamental forces shaping steel industry dynamics

Four fundamental forces shaping steel industry dynamics

1. Steel demand

Global steel demand has rebounded up to record levels

Global steel demand as a whole held flat during 2020. While the markets in the EU and North America experienced a demand drop of 8% and 15% respectively, continued growth in Asia fully offset that fall in demand. During 2021, industrial activity recovered in all markets, and in combination with low inventory levels in most value chains, apparent global steel demand rose 6% to a new record level of approximately 1,875 million tonnes. This has created the recent favorable market conditions for steel prices.

Demand for high-strength steel

The use of high-strength steels provides advantages in the form of stronger, lighter and more durable steel solutions. Use of these steels therefore continues to increase and experience higher growth than standard steels. Across segments, customers are working with high-strength steels to lower costs, improve safety and lighten the weight of their products, thereby reducing their environmental impact.

Supply chain disruptions

A shortage of steel and other key components such as semiconductor chips affected some sectors during 2021, and strained economic growth somewhat. Several vehicle manufacturers were forced to idle or reduce production during 2021 due to the lack of semiconductors. There was also a shortage of transport capacity, such as container and truck capacity, which affected many customer segments. Without these disruptions, steel demand would probably have been even higher during 2021.

Strong prospects for fossil-free steel

There is a growing interest for steel with a low environmental impact. Today, the mobility sector is leading the way with companies like Daimler/ Mercedes-Benz, Volvo Group and Volvo Cars aiming to reach carbon neutrality. This is clearly in line with the general trend among companies of setting science based emission targets that are in line with the Paris Agreement. Almost 1,000 companies, including SSAB, have agreed on climate targets that are approved by the Science Based Targets initiative.

2. Steel supply trends

Healthy capacity utilization

Global steelmaking capacity peaked in 2015, at which point Chinese authorities decided to halt any further expansion of capacity and removed some 150 million tonnes of capacity. Also supply fell in other regions, like the EU and North America due to obsolete blast furnace capacity that has been removed from the market. These industry actions have resulted in an improvement in global capacity utilization from an average of 69% for 2010-2017, to 79% for 2018-2021E. With continued steel demand growth, and limited capacity expansion in the near term, the global steel industry is set to operate at much better utilization levels in coming years.

Supply landscape transformation

New customer demands and predicted increased costs for CO2 emissions have triggered transformation in the steel industry. During 2021, the European Commission introduced its Fit for 55 package, which contains legislative proposals to increase the 2030 emissions reduction target from 40% to at least 55%. Many industry participants are exploring new technologies – including ones using hydrogen – to meet these new demands. This is likely to mean that more steel companies will shift away from blast furnace based production to electric arc furnaces.

3. Steel trade flows

Increasing trade tensions

The introduction of trade barriers was growing worldwide already before the Covid-19 outbreak and the number of global trade restrictions has increased in recent years. Section 232 tariffs in the US may be the best-known measure, but several other regions have also introduced retaliatory measures. Furthermore, the European Commission has proposed a carbon border adjustment mechanism to prevent the risk of carbon leakage. However, in 2021 the US and EU agreed to ease tariffs on steel and aluminum.

Market regionalization

Trade policies combined with increasing steel demand locally have resulted in decreased trade, particularly between geographical regions. Extra-regional steel trade (i.e. excluding trade within for example the EU) has fallen by over 20% in the past 5 years, and supplied only 13% of global steel demand in 2020. The EU, the US, Mexico and Canada remain large net importers of steel, with a trade deficit of 10 and 18 million tonnes respectively in 2020. China, which has historically been a major net exporter of steel, has been a net importer during parts of 2020 following a strong domestic demand recovery. The Covid-19 pandemic could be a further catalyst of market regionalization as companies may consider localizing supply chains and further support a local green re-start of the economy, e.g. through carbon border taxes.

4. Input materials

Volatility in iron ore prices

China’s response to the economic fallout from the pandemic created a sharp rise in the price of iron ore. After months of widespread lockdowns due to outbreaks of Covid-19, China increased investments in the construction sector. At the same time, Brazil, a large mining country, was severely hit by Covid-19 and several mines were forced to cut production. During 2021, iron ore prices reached record levels at over USD 220/tonne, but started falling in June and closed the year at around USD 120/tonne after the situation had stabilized in China.

Volatility in coking coal prices

Coking coal prices started 2021 at a level of USD 100/tonne. However, robust demand coupled with limited spot availability caused an upswing in coking coal prices, which at their highest were over USD 400/tonne at the end of the year.

Stable high scrap prices

Scrap prices in the US have remained high and stable at USD 400-500/tonne during 2021. Going forward, demand for premium scrap in particular is expected to increase as more electric arc furnaces are being built around the world.

Steel prices

Steel prices in SSAB’s core markets have been volatile in recent years. During the Covid-19 outbreak in 2020, both Europe and the Americas experienced supply chain disruptions. Many steel producers reduced their capacity during the initial downturn. As demand improved, prices started to climb towards the end of the 2020, and continued to surge during most of 2021 to new record levels in all markets. Hot-rolled coil prices peaked in Europe in July, when they were up 190% compared with the same period in 2020, and in the Americas in September when they were up 240% also compared with the same period previous year. Since then, prices have fallen somewhat – but a structurally healthier demand/supply balance indicates continued good steel prices.

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 an annual steel production capacity of approximately 8.8 million tonnes, SSAB is a small player in the global steel market. This is why SSAB specializes in and focuses on four defined segments, where we have strong market positions:

  1. Flat steel and tubes in the Nordics
  2. Heavy plate in North America
  3. Automotive premium steel (Advanced High-Strength Steel, AHSS) globally
  4. 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% for flat carbon steels in the Nordic region. In North America, SSAB is the largest producer of heavy plate, with a market share of about 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 steelmaker, 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 also sold through steel service centers and distributors.

SSAB is market leader in defined areas of the global steel market