Speakers at the Kallanish Asia Steel Markets 2021 conference last week gave their outlooks on trade flows following the unforeseen Covid-19 shock to trade last year.

Derek Langston of SSY Consultancy Research pointed out that freight rates are at an 11-year high due to economic and industrial recoveries, container shortages, revival in soybean and corn exports, and trade patterns in Southeast Asia. Market fundamentals have been transformed since the beginning of 2021 and decarbonisation measures are also taking effect in the shipping industry, he added.

“The International Maritime Organisation (IMO) 2030 target is to cut carbon intensity by 40% from 2008 levels,” he observed. “From 2023 there will be an energy efficiency index for existing ships, although we don’t know the exact requirements and penalties today. There is also uncertainty for the new building designs, scrapping implementations and the future of fuels.”

Meanwhile, Galex Steel International managing director Gorkem Bolaca said China is focusing more and more on its domestic market. “China wants to focus more on the domestic market. With all new regulations and with the use of digital Renminbi, China wants to extend its investments without using the US dollar,” he added.

Bolaca said Turkey is becoming more aggressive in steel exports, specifically in Southeast Asia. “China is expected to become a net importer of steel and we expect Turkey’s exports to China to boom in less than a year.”

Kallanish North America editor Dan Hilliard said market sources expect US sheet prices, which are at historically high levels, to ease in summer but semiconductor shortages may postpone that.

“For the new infrastructure projects, steel will either be sourced at cheaper prices or from outside of the country as they are government contracts. Regarding protectionism, I think we will see a lot more comprehensive deals from the Biden administration. We will likely see the continuation of Section 232.”

Tomas Gutierrez, Kallanish Asia managing editor, said Chinese scrap imports are likely to grow. This comes as Chinese EAF capacity is expected to reach 250 million tonnes/year by 2025 and BOF scrap rates are seen growing to 21% from the current 16%.

“China is importing premium scrap, not HMS, mostly from Japan,” he observed. “There is also huge demand for prime scrap globally which makes the prime scrap market tight. In Q1 China imported 55,000 tonnes of scrap but it is becoming more regular now.”

Regarding China’s export rebate reduction, “it is expected to be finalised by the end of the month, but market sources believe there will be no rebate for hot rolled coil. Impact will be stronger on flat steel exports, and semi-finished steel imports,” Gutierrez commented.

He also expects to see more protectionist measures in Southeast Asia following Malaysia’s export tax of 15% on scrap.