Steel demand and prices are forecast to remain structurally high, while supply and demand should become rebalanced post-Covid-19-impact at the end of this year, Tata Steel Europe chief executive Henrik Adam said at the Kallanish Europe Steel Markets virtual conference on Wednesday.

“Our cost of supply has increased with iron ore being at record high levels … I think the price level will remain high and also with a more local focus after the pandemic,” Adam observed. “Pricing will be at a different level compared to what it was in the past for quite some time.” High steel values are not the result of volatility and speculation but of structural change, he added.

Overcapacity has been halved globally over the last year. It went down from 800 million tonnes/year to 400mt. The pandemic took producers by surprise and reduced demand from some sectors by 90% “more or less overnight”, the ceo commented.

Producers are still struggling to return to a supply-demand balance because the overall supply chain has been shaken by unexpected lockdowns. “Since the beginning of the year we are getting back on track,” Adam observed. “It is not a one-time effort … From one cast of liquid steel we serve different customers and not just one group, so we need to constantly reshuffle our production schedule which is causing delays. We think it will be some time until we go back to a normal performance.”

It may take 6-9 months to rebalance supply and demand after the pandemic market disruption. Towards the end of the year customers should see the beginning of a normal supply situation from most mills, Adam forecasted.

Decarbonisation will also make steel more expensive due to increasing carbon costs and heavy investment to produce “green” steel. Tata Steel has decided to implement a carbon surcharge as a new structural element in its pricing. The CO2 price per tonne has increased from the end of last year from €30/tonne ($36) to €50/t. The surcharge will be applied for every new contract, the ceo confirmed.

Tata Steel is Europe’s third-largest producer with a crude steel output of 12m t/y. It has steelmaking sites in the Netherlands and UK, and distribution sites across Europe and other parts of the world. The company is heavily investing in decarbonisation of steelmaking, including in hydrogen technology, and looking at scrap as a means of decarbonisation to start moving away from iron ore.