Reduced production in developed countries

China, India and developing countries in Southeast Asia such as Vietnam, Indonesia and the Philippines continue to have a huge growth profile that will drive steel demand for a long time from infrastructure and real estate development.

For developed countries, the picture is less rosy. Except for the fact that the US is actively discussing but still not coming close, the $ 1 trillion infrastructure redevelopment, the growth potential of infrastructure and construction is much less. High quality industrial steel will still find buyers, but it is likely that there will be fewer buyers. If markets are not protected, it becomes increasingly difficult to make money from commercial quality goods.

The coronavirus outbreak in 2020 has only accelerated market dynamics that have already been taking place. The transfer of steel production capacity from developed countries to developing countries is likely to pick up momentum. Despite the raging anti-globalization debate in light of the coronavirus pandemic, production will continue to follow suit.

Platts estimates that Japanese car manufacturers will use up to 15% less steel in the first half of 2020 than in the same period last year. In 2019, Japan exported about a third of the 99.3 million tonnes of steel it produced, according to Platts estimates based on data from the Japan Federation of Iron and Steel.

The supply of Japanese subsidiaries and home appliance manufacturing units in Southeast Asia and elsewhere has been challenging this year due to coronavirus-related lockdowns and transport restrictions. In response to slumping domestic and international demand, Nippon Steel and JFE Steel have cut blast furnace output since April, but may need to further cut production.

Auto production in South Korea in April was 22% lower than a year earlier, while auto exports fell 44%. US auto exports fell 28% year on year in April, according to the Department of Commerce, Industry and Energy. South Korean steel company POSCO produced 42.8 million tonnes in 2018 but plans to produce just 34 million tonnes this year due to lower demand from the auto sector and some maintenance work at its facilities, the company said in April.

American steel mills cut production as the country's automakers halted production and were operating at 50% capacity in mid-May, up from 80% in early March, data from the American Iron and Steel Institute showed. In Europe, steel production dropped 50% as new orders fell by as much as 75%, industry association Eurofer told Platts in late April.