PDF Overview of steel and iron market 2017 - Deloitte US

Overview of steel and iron market

Deloitte CIS Research Centre Moscow, 2017

Contents

01

Introduction

Key findings

02

Global steel and iron market

Output trends Consumption trends Commodity prices for 2016-2017 Steel prices for 2015-2017

03

Overview of the Russian steel and iron market

Output trends Consumption trends Exports Imports

3

04

The current state of the steel-making

industry in Russia

20

4

5

05

Appendix

22

6

8

10

06

Contacts

23

12

13

14 17 18 19

01 Introduction Key findings

02 Global steel and iron market

03

Overview of the Russian steel and iron market

04

The current state of the steelmaking industry in Russia

05 Appendix

06 Contacts

02

Introduction

Andrey Sedov Partner, Leader of the Metals group in Deloitte, CIS

Deloitte CIS thanks for your interest in Overview of steel and iron market research, which is conducted on a regular basis.

The global metals market is primarily driven by three critical factors: the Chinese market, USD exchange rates and oil prices. This triad is as important as ever. The demand from China has recovered due to government incentives for the manufacturing industry while the US dollar has weakened on the global market amidst a growth in oil prices, boosting prices across all metals, with steel being no exception. In addition, the year 2016 saw steel prices hit a record of USD 500 per tonne since 2014.

The metal product output and consumption arena has also witnessed several developments. In 2016 the downward trend line continuing from 2015 gave room to a more stabilised trend, with industry indicators changing less than 2 percent: ? Steel output grew by 0.8 percent up to 1,629 million tonnes ? Steel consumption grew by 1.3 percent up to 1,600 million tonnes

We appreciate your comments and/or recommendations, which will be incorporated in our next research project.

Should you have any questions regarding this research project or any other of Deloitte's research projects, please do not hesitate to contact us.

Igor Budanov Professor, Doctor of EconomicsInstitute for Economic Forecasting of the Russian Academy of Sciences(INP RAN)

From a strategic perspective, the steel and iron industry depends on global industralisation, which primarily involves the demand for metals from countries that are ready to make an investment leap (e.g. India, Vietnam and Indonesia). From a tactical perspective, the industry is dependent on actions China and global companies might take and how some countries would respond in terms of protectionism.

While being potential regions of growth, India, Iran and Vietnam have limited opportunities to raise capital. The search for a solution is on, with a way out likely to be found in 2018-2019. However, these countries will not have a significant impact on the global metals market. Growing demand will drive the rise of local industry. Countries in the Middle East and Africa represent potential growth areas that will be attracting global resources to meet the demand. Investment mechanisms may start emerging in these countries after 2020.

Re-industrialisation of the industrialised nations is expected to involve a fundamentally different technology platform. This effort would require materials that are substantially different from the existing offerings on the global market. The development of a resource platform for cutting-edge manufacturing applications is currently driven by projects aimed at manufacturing metal products with the use of rare earth elements and producing metal powders to support additive technologies and increase the output of products with higher technological availability (e.g. products and fabricated metals with complex structures).

Demand limitations in 2017 highlight the importance of corporate policy as a tool for gaining a competitive edge. Companies price their products to solve the tasks at hand, which leads to volatility in prices.

01 Introduction Key findings

02 Global steel and iron market

03

Overview of the Russian steel and iron market

04

The current state of the steelmaking industry in Russia

05 Appendix

06 Contacts

03

Key findings

In 2016 the downward trend in output and consumption that had been continuing from 2015 gave way to greater stability, with industry indicators changing by less than 2 percent: ? Steel output grew by 0.8 percent up to 1,629 million tonnes ? Steel consumption grew by 1.3 percent up to 1,600 million tonnes.

Over the first three months of 2017 saw global steel output reach 410.5 million tonnes, up 5.7 percent from the same period in 2016.

In 2016 China saw an increase of 1.8 percent in domestic consumption of steel amidst the continuing incentives and growth in loans.

Driven by a decrease in government incentives, an expected gradual weakening in the demand from China will create an oversupply, forcing prices down.

In 2016 steel output in Russia has grown by 0.3 percent to 69.6 million tonnes.

The apparent domestic consumption of steel dropped by 3.9 percent to 34.6 million tonnes. However, 4Q2016 saw a YoY increase of 3.7 percent as a result of the slightly improved situation in the construction industry and the Russian economy as a whole.

Exports and imports totaled 43.3 million tonnes and 11,3 million tonnes, respectively.

Top-5* issues for the industry in 2017: ? Prospects of weaker domestic demand ? Stagnation in the Russian economy ? Decrease in core business revenue ? Higher production costs in Russia ? Stricter government regulation in Russia

Top-5* priority business strategies in 2017: ? Ongoing cost control ? Business development through organic

growth ? Cost cutting ? Increase in domestic output ? Expansion into new markets

01 Introduction Key findings

02 Global steel and iron market

03

Overview of the Russian steel and iron market

04

The current state of the steelmaking industry in Russia

05 Appendix

06 Contacts

*Based on the annual survey by Deloitte CIS.

04

0G2lobal steel and iron market

Global steel and iron market

01 Introduction Key findings

02 Global steel and iron market Output trends Consumption trends Commodity prices for 2016-2017 Steel prices for 2015-2017

03

Overview of the Russian steel and iron market

04

The current state of the steelmaking industry in Russia

05 Appendix

06 Contacts

05

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