'Steel Industry Rekindling the Furnace'... Reality Is 'Unpredictable Even Two Months Ahead'

Global No.1 ArcelorMittal France Steel Plant Resumed Operations Last Month
Nippon Steel to Join Restart Next Month

Automotive and Construction Industries Revitalized... Expectations for Infrastructure Investment in China and Europe
Production Increase Difficult Due to Uncertainty... This Quarter's Outlook Also "Unpredictable"
Some Predict "Temporary Demand Surge" Will End

[Asia Economy Reporter Kwon Jae-hee] The global steel industry, which experienced a sharp decline in demand due to the impact of the novel coronavirus infection (COVID-19), has recently increased production, leading to mixed interpretations. While the steel industry, which recorded the worst-ever losses in the first and second quarters, is expecting to turn a profit in the third quarter, there are also considerable forecasts that this will be only a temporary rebound.

According to foreign media including the Nihon Keizai Shimbun on the 12th (local time), ArcelorMittal, the world's largest steelmaker, restarted its Fos-sur-Mer steelworks in Marseille, France, at the end of last month. This came about six months after the blast furnace was temporarily shut down due to the impact of COVID-19. Nippon Steel, the world's third largest, will also restart one blast furnace that was shut down after the spread of COVID-19 starting next month. JFE Steel, Japan's second largest, has already begun operating the blast furnace at the West Japan Steelworks in Fukuyama City, Hiroshima Prefecture. In addition, Brazil's Usiminas and the US's U.S. Steel have also reignited their blast furnaces. Steel industry media SBB reported that as of last September, 22 out of 72 blast furnaces worldwide that were closed due to the COVID-19 pandemic have resumed operations. This means that 34% of the total blast furnaces have restarted.

The steel industry began restarting blast furnaces that had been halted because demand increased in downstream industries such as automobiles, construction, and home appliances. Automobile production performed better than expected, and in China and Europe, government-led infrastructure investments are actively being promoted to recover economies devastated by COVID-19. According to the World Steel Association (WSA), global steel production in August reached 156.2 million tons, a slight increase from the historic low of 137 million tons in April.

Toyota's export performance to the United States last month was 50,000 units, up 1.8% compared to the same month last year. Exports to Europe also performed well at 19,000 units last month.

The Nihon Keizai Shimbun analyzed, "Demand in Japanese manufacturing, centered on automobiles, is recovering," and added, "With Nippon Steel restarting its blast furnace, Japan's crude steel production capacity is expected to recover to 90% of the pre-COVID-19 pandemic level."

Infrastructure investments in China and Europe are also stimulating steel demand. The increase in government-led infrastructure investments is contributing to the recovery of steel demand. The Chinese government announced plans to allocate a record fiscal budget exceeding 3.6% of GDP to focus on infrastructure investment. The WSA forecasted that China's steel demand this year will increase by 1% year-on-year to 9.165 million tons. France also announced an "economic recovery plan" to invest 100 billion euros (approximately 136 trillion won) over the next two years in more than 70 sectors to mitigate the economic damage caused by COVID-19, with a significant portion focused on construction and infrastructure investment. From the perspective of steel demand alone, this can be interpreted as meaning that the impact of COVID-19 has been minimal. Swiss financial firm UBS also presented a positive scenario where about one-third of Europe's blast furnaces, temporarily halted due to COVID-19, will resume operations.

However, doubts remain that despite the rebound in steel demand, a full recovery may not occur. The WSA analyzed, "In the absence of vaccines or treatments, if efforts to block second and third waves fail or if government stimulus measures do not prove effective, the rebound in demand may be delayed." In particular, although sales in the automobile sector, which accounts for about 20% of steel consumption in Europe, have increased, some observations suggest that it is still far from fully recovering to pre-COVID-19 levels. There is a high possibility that the demand surge in the third quarter will be temporary and that uncertainty will return after the fourth quarter. Although we have already entered the fourth quarter, a domestic steel industry official responded "unpredictable" when asked about quarterly demand forecasts. Global auto parts maker Continental forecasted that global automobile sales will recover to normal levels only by 2025. Some also point to oversupply as a negative factor affecting blast furnace operations. According to the WSA, global total steel production was 1.87 billion tons last year, with an oversupply estimated at 500 million tons.

This content was produced with the assistance of AI translation services.