DRI & Iron Ore Pellet Markets Market Assessment & Outlook

Transcription

1 6th World DRI & Pellet Congress April 25, 2018 DRI & Iron Ore Pellet Markets Market Assessment & Outlook Produced by Metal Bulletin Research, Brian Levich, Consultancy & Special Projects Director Tel:+44 (0) APRIL 2018

2 About Metal Bulletin Research Metal Bulletin Research is a division of Euromoney Global Limited Registered in England Registered No Registered office: 8 Bouverie Street, London, EC4Y 8AX, UK. Independent Trusted Commodities Market Research MBR is one of the world s leading independent, third-party commodity market research specialists known for its reliability, independence and integrity Accurate Proven Track Record in Forecasting Since 1991, MBR has continued to provide innovative and insightful market research to all key players in the metals, mining and industrial mineral space Data- Intensive Proprietary Market & Price Databases Continuous coverage of all commodity markets through publications, forums, database research, in-house consultants/analysts and consulting arrangements Expertise Experts in Multiple Global Office Locations The volume of repeat business MBR has highlights our level of market expertise & our regard to delivering client solutions Page 2

3 MBR provides Independent & Trusted Consultancy Services Market Assessment Studies (including project feasibility reports ) MBR provides clients with fully independent market feasibility studies which objectively and rationally uncover the strengths and weaknesses of a proposed project, opportunities and threats present in the environment etc Profile current and future product markets: Supply; Demand; Capacity; Price & Quality Requirements Operating Costs of production Product capacity & mix Strategy Market Scenario Analysis Competitive analysis vs. competitors Financial Feasibility Studies Financial analysis is done to check the project viability. For this purpose, profit and loss statements. as well as cash flow statements are made for a period of at least 20 years of plant operations after the commissioning of the plant. Plant flow sheet, input/sales sheets etc. IRR, NPV etc. analysis Conduct sensitivity analysis on key parameters Technical Feasibility Studies MBR s team of independent and senior technical engineers can advise on: Greenfield/brownfield operational excellence programmes, Plant material balance and flow sheets Asset valuation and liquidation Technology options & providers Environmental/carbon advisory And many more topics Procurement Advisory Expertise Monitor all key commodity prices and with our assistance help you anticipate the best times to make sourcing decisions Contract advisory to ensure best practise and correctly price by grade/alloys Benchmark prices correctly and monitor purchasing performance Budget planning and procurement spend reviews with accurate price data Page 3

4 Key Themes to be Investigated 5. Price Forecasts 4. Global Steel Trade What will be the impact of Steel Trade Wars? Is diversion into the region a real concern? 05 What does this mean for prices? Our independent outlook on steel and steel raw material prices Primary Research Steel Raw Materials What is happening to iron ore prices? How about DRI pellet premiums? What changes are underway? Steel Demand What is the outlook for regional demand? The Global Picture namely China! 2. Competitiveness by Steelmaking Route How competitive is DRI-EAF steelmaking now and in the future? Re-rolling? Are new sources of billet here to stay? Are margins likely to be viable? Page 4

5 Raw Materials

6 Iron Ore Price Movements? What is happening to iron ore prices? What about DR Pellet Premium? Long-Term $45-75/tonne Long-Term $40-50/tonne Source: 2018 MBR Iron Ore Database

7 DR Pellet Merchant Trade DR Pellet Supply Return of 7-10m tpy from Samarco in 2019? Vale re-started 7m tpy in 2017/18 - Tubarao and Sao Luis Vale shifting to 55% DR pellet by 2019 (from 45%) Other miners maximising DR pellet supply at Oman, Bahrain and LKAB Historic Merchant Market ~35m tonnes Forecast Merchant Market in 2030 ~50m tonnes

8 DR Pellet Demand and DRI Output DR Pellet Demand MENA dominant in pellet ~46% of DRI ~55% of DR Pellet Why? India coal-based DRI Iran still growing Algeria Egypt Additional capacity due on-stream 2m tpy in plus more later Tosyali to add DRI and DR pellet plant in 2018 Qatar-Sider JV DRI facility to start in 2018 plus Phase II Alternative Projects under consideration Lower gas prices in future could trigger higher capacity utilisation rates MENA is the dominant market for DR Pellet and its importance will grow

9 Operating Costs in the MENA Region

10 DRI Costs vs Scrap-based steelmaking typical MENA mill Rising Energy costs + iron ore + other consumables + DR pellet premiums DRI-EAF Operating Cost Forecast Scrap-EAF Operating Cost Forecast DRI vs Scrap Cost Comparison We expect that this ~ $50/tonne cost advantage is here to stay from 2018! Low base iron ore prices Declining pellet premium thanks to additional capacity Elevated scrap prices e.g. US production rates rising

11 Re-rolling longs & margins Longs re-rolling under pressure Low iron ore prices in 2015/16 and weak Chinese demand and excess steel capacity led to a dramatic increase in Chinese billet exports cheap Chinese billet was available No longer present with Chinese demand recovery/lower exports Could return in future? Long Product Demand slumping Regional demand has slumped putting pressure on local prices and increased competition Re-rollers struggled in 2017 Saudi square billet imports went from >1m tonnes in 2015 and 2016 to just 165,000 tonnes in 2017 Going forwards? Iranian presence into UAE & Oman A massive surge in Iranian billet availability has resulted in Iran dominating supply into these markets (at low prices). Source: MBR Alternative billet suppliers Non-traditional billet suppliers in GCC e.g. South Steel, Watani, SULB Bahrain are increasingly active Break-even level based on CIS import billet vs Turkish import rebar plus 5% premium and rolling/logistics cost of $70/tonne.

12 Steel Demand

13 Steel Demand MENA Region Near-term recovery in energy values will support GDP Crucially we expect GDP to exceed energy growth as manufacturing and services benefit from economic diversification MENA flat product demand in 2017 was 27.5m tonnes Demand in the region is heavily skewed towards lowvalue products HRC & HRP MENA long product demand in 2017 was 49.3m tonnes Demand in the region is heavily skewed towards lowvalue products rebar Source: Oxford Economics, Havers Analytics, MBR Middle East Report MENA includes: Algeria, Egypt, Libya, Morocco, Tunisia, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE, Iran, Iraq, Lebanon, Jordan, Syria & Yemen

14 MENA Self-Sufficiency Ratios Long Products Flat Products High self-sufficiency ratio for region Key importers Yemen, Iraq, Lebanon, Algeria Limited imports KSA, other GCC, North Africa (excluding Algeria) Exports Oman, Iran Upcoming changes rapid increase in Algerian output with AQS and Al-Tuwairqi Lower self-sufficiency ratio for region Key producers Egypt, KSA, Iran Major importers UAE, other GCC, North Africa Upcoming changes major increase in PPG capacity Opportunities PPG, HR plate and HRC in GCC MENA includes: Algeria, Egypt, Libya, Morocco, Tunisia, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE, Iran, Iraq, Lebanon, Jordan, Syria & Yemen

15 Steel Trade Diversion

16 MENA is a Price Taker not a Price Setter - Global Trends China (and Other Asia) account for two-thirds of global demand How that region performs going forward will drive global steel demand Chinese exports are half their peak of mid-2016 But an extra 50m tonnes of exports is only 7% of current demand or 5% of capacity And Local Risks Return of Iranian sanctions hits financing of Iranian exports Spread of regional civil wars (Syria, Yemen) into more widespread regional disputes Collapse of oil prices Worsening of GCC political cohesion Other Global Risks Rising US & EU interest rates in 2018/19 as a result of rising inflation Steel Trade War depresses demand and volumes Source: WSA, Customs data, MBR

17 Steel Trade Diversion Risks MENA mills shipped 565,000 tonnes to the USA in 2017 This is unlikely to be repeated in 2018 MENA mills shipped 784,000 tonnes to the EU 28 in 2017 Vulnerable to AD and/or safeguard action Global steel trade was 300m tonnes in 2016 EU & NAFTA accounted for 27% of non-regional imports (75m tonnes). If they put up barriers, MENA is an obvious market for diversion Source: WSA, Customs data, MBR

18 Steel Price Forecasts

19 Steel Price Recent Trends GCC rebar import ($/tonne cfr Gulf port) Prices close to 5-year high after steady appreciation during 2017/18 GCC HRC import ($/tonne cfr Gulf port) Prices close to 5-year high but greater volatility than long products Steel Price Drivers Synchronised global economic growth in % the highest since 2008 recession* Substantial cuts in Chinese capacity limited exports Q removal of 120m tpy of induction furnace capacity that made rebar had a dramatic impact on rebar prices in China Ongoing restrictions in output (for environmental restrictions) Re-stocking through supply chain after steel price recession Source: MBR

20 Steel Price - Outlook SUPPLY year-on-year crude output growth has been rising steadily for 18 months that is usually the length of a cycle DEMAND IMF Forecasts of 3.9% per annum global GDP growth for 2018 and 2019 equivalent to 2-3% steel demand growth INVENTORIES Chinese long steel inventories are elevated weak short term outlook. Flats normal less downside price pressure Steel prices have peaked and will drop from current levels by end-2018 but limited such that will not mean an overly harsh negative margin environment Source: MBR, WSA, IMF World Economic Outlook, April 2018

21 Conclusions

22 Conclusions 5. Price Forecasts 4. Global Steel Trade The Steel Trade Wars do pose a threat to the region Regional steelmakers will lose export volumes There is a real risk of diversion from Turkey, CIS and Asian sources into MENA markets But there are opportunities. Regional demand growth is strong and well-structured supply into markets can be achieved? Primary Research We think that the best may be past Push to add value added products and byproduct/waste recycling price maximisation Raw material management and inventory control - industry 4.0 Diversify export markets Improve marketing practises Localise supply chains and seek fair trading practises via closer government interaction 1. Steel Raw Materials 3. Steel Demand Iron ore is range-bound we don t expect substantial movements DRI pellet premiums will ease in 2018 but remain at high levels until additional supply comes DRI pellet is a long-term growth market and MENA is the dominant consumer Regional steel demand outlook is positive we are at the bottom. Global Outlook is positive for 2018 and 2019 in volume terms But there are risks rising interest rates, slowing China and trade/political disputes 2. Competitiveness by Steelmaking Route The economics of DRI-EAF steelmaking look good for the next few years vs scrap and BOF The outlook for re-rolling is more questionable Page 22

23 Brian Levich Consultancy & Special Projects Director Global Contact Details Website (0) Diane Culligan Consultancy Manager & Principal Client Liaison +44 (0)

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25 The Metal Bulletin (MB) Group - Metals Divisions Independent research and consulting business providing a series of shortterm and long-term forecasting services to our pricing, plus special reports and consulting. The original metals price reporting & analytics agency since 1882 with more than 1,000 proprietary price assessments in 25 regions across North America Conferences Division connecting metals professionals for more than 3 decades, attracting more than 10,000 industry experts from 2,300 organisations and 140 countries every year. Established in 1913 with over 700 proprietary price assessments covering every major trade region & commodity Mine-to-market global nonmetallic minerals intelligence Page 25

26 DR-Grade Pellet Premium Assessment Details and suggested specification for Metal Bulletin s proposed DR- Grade Pellet Premium Assessment: Parameter Base Fe 67.5 Silica 1.5 Alumina 0.5 CCS 300 Sizing >9mm >94% Basis Units Associated Index Frequency Middle East Reference USD per dmt MBIOI-62 Monthly Details Monthly Assessment Refers to 67.5% Fe DR-Grade Pellet - Middle East basis

27 Index Methodology Data collection designed to maximise data points. NDAs may be signed as required. Messenger Services Calls s Data Collection Model Normalisation Procedure NORMALISATION The normalisation would be updated quarterly and based on an analysis of material specification and marketimplied value-in-use. Three sub-indices; each tonnage weighted to balance market and remove potential bias. 33.3% Producers 33.3% 33.3% Traders Consumers Each sub-index is a tonnage-weighted average of price data from that particular part of the iron ore spot market. The final index price is the straight average of the three sub-indices. Producers, Consumers and Traders have an equal weighting in the final index price. Both sides of the market represent 50% of the preliminary index figure. Preliminary Index Figure Any data points falling +/-4% away from the preliminary index figures are excluded as outliers and the index recalculated. The final index is published at 6.30pm Singapore time and is distributed via daily alert, the Metal Bulletin website, Bloomberg and Reuters. Final Index

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30 Why Metal Bulletin Research is the Right Choice 01 Product coverage Steel (all product forms) Steel raw materials - Scrap - Iron ore - Coking coal - Coke/PCI - DRI/HBI Tube and pipe Ferro-alloys Stainless steels Aluminium Copper Tin Zinc Lead Nickel Ores and concentrates Gold/silver/PGMs Industrial minerals including battery Materials Lithium Graphite Manganese Cobalt Nickel Minor metals Wire and cable Market Applications Transportation Building & Construction Mechanical Engineering Yellow Goods Packaging Appliances Power/energy/gas/oil Vast degree of commodities specialism Strong Brand & Expertise Accurate Analysis & Forecasts Bottom-up Research The Metal Bulletin brand is well known and regarded globally within the metals/mining industry. Our powerful brand opens doors to highlevel executives within each part of the value chain Access robust proprietary forecasting models and market databases developed since 1991 working within the IOSCO Principles. Since 2011, Metal Bulletin Research analysts have taken the Top 4 and Top 5 positions on the overall APEX leader board (independent survey tracking performance of more than 20 top metal price forecasters), with an accuracy rate of over 94%. MBR employs substantial resources when conducting primary research assignments. Page 30

31 What your Industry Peers Say about MBR Senior Special Assets Manager, HSBC MBR offers a quality product & range of services which I consider as an invaluable source for our business intelligence. Procurement Strategy, Coca-Cola Your work is by far the most thorough independent analysis on this region currently available anywhere Strategy/Investments Director, Posco America MBR has been a great resource for us to use in determining US future steel consumption levels Business Strategy, Saudi Basic Industries MBR is a well regarded & trust name in the area of commodities research in Middle East and North Africa Market Intelligence Manager, Baosteel Your teams provide an excellent overview and thorough understanding of the global steel markets Marketing Development Automotive and Special Bars Quality, ArcelorMittal Europe I want to thank you and say your work is very useful for our automotive marketing and sales teams Senior Marketing Executive, Rusal MBR has provided Krasnoyarsk Aluminium Smelter with a highly satisfactory bespoke global market study for highly specialized & little known aluminium products. VP, Sumitomo Metal Mining Co Ltd I would highly recommend your services to anyone when requiring market strategy guidance Page 31

32 Global Iron Ore: Market, Prices and Operating Mine Costs out to 2030 The Iron Ore Market Study, available now from MBR, offers all supply, demand, trade, operating mine costs and price data for all major ores, in one place. Including: Price forecasts out to 2030 Global iron ore demand and supply analysis Mine-by-mine operating costs for pellets, fines and lump Steel company iron ore procurement database Comprehensive and unique pricing and forecasts Quarterly updates data for costs, demand and supply And much more

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