금융시장
Industry Early Warning Series (10) : Risk Analysis on the Steel Industry
2010-02-18KIM, Eu-Gene
목차
요약
Assessment of Key Risk Factors for the Steel Industry
Continuing excess supply from China makes a recovery to pre-crisis conditions unlikely
The Chinese steel industry has excess production capacity and supply and demand
conditions and government-directed prices are major issues. Although rapid exit strategies that threaten China’s economic recovery are unlikely, it will be difficult for the central government to restructure to the extent they want.
In 2010, demand and production volumes will continue to rise. However, excess supply and capacity are 45 million tons and 120 million tons respectively. As a result, prices will decline to the $550~650 range while remaining above $500.
Plate prices are likely to decline due to the shipbuilding downturn and excess supply
Automobiles and construction are key downstream industries for the steel sector, and have rebounded even more strongly than they did after the foreign currency crisis. However, the outlook for the shipbuilding industry continues to be bleak.
Steel plates are of particular concern since large-scale expansion and the shipbuilding downturn will harm supply and demand conditions. In 2010, production will rise by 3 million tons YoY to 11 million tons, while demand will decline by 7.6% YoY to 12 million tons.
As a result, the problem of insufficient domestic steel plate production and the reliance on imports will be resolved. However, if imports decline by less than 50% YoY, supply and demand may be imbalanced, which would drive down prices for domestically produced steel plates, which are currently more expensive than imported plates.
Major furnace firms will bear most of the costs from Eco-Steel
Steel production is extremely energy-intensive and the steel industry will be significantly affected by rising costs stemming from environmental regulations. Most of these costs to the steel industry will be borne by major furnace firms.
Using the government’s BAU forecast for 2020 to estimate the steel industry’s BAU and assuming that all emissions permits will be purchased externally, the costs to the steel industry could reach 1.3 trillion won, of which 85% will be borne by furnace firms.
A rebound to pre-crisis levels is unlikely and small mills and plate firms are at risk
The domestic steel sector bottomed in 1Q09 and is now recovering, but prices are unlikely to return to pre-crisis levels due to excess supply from China. As a result, domestic roughing mills that have been posting losses will continue to face considerable challenges.
Plate prices are likely to decline in 2010 due to the shipbuilding downturn and excess
supply. As a result, plate makers may face deteriorating profitability.
Major furnace firms will bear most of the costs related to Eco-Steel, and there is little
risk in terms of credit management.
Continuing excess supply from China makes a recovery to pre-crisis conditions unlikely
The Chinese steel industry has excess production capacity and supply and demand
conditions and government-directed prices are major issues. Although rapid exit strategies that threaten China’s economic recovery are unlikely, it will be difficult for the central government to restructure to the extent they want.
In 2010, demand and production volumes will continue to rise. However, excess supply and capacity are 45 million tons and 120 million tons respectively. As a result, prices will decline to the $550~650 range while remaining above $500.
Plate prices are likely to decline due to the shipbuilding downturn and excess supply
Automobiles and construction are key downstream industries for the steel sector, and have rebounded even more strongly than they did after the foreign currency crisis. However, the outlook for the shipbuilding industry continues to be bleak.
Steel plates are of particular concern since large-scale expansion and the shipbuilding downturn will harm supply and demand conditions. In 2010, production will rise by 3 million tons YoY to 11 million tons, while demand will decline by 7.6% YoY to 12 million tons.
As a result, the problem of insufficient domestic steel plate production and the reliance on imports will be resolved. However, if imports decline by less than 50% YoY, supply and demand may be imbalanced, which would drive down prices for domestically produced steel plates, which are currently more expensive than imported plates.
Major furnace firms will bear most of the costs from Eco-Steel
Steel production is extremely energy-intensive and the steel industry will be significantly affected by rising costs stemming from environmental regulations. Most of these costs to the steel industry will be borne by major furnace firms.
Using the government’s BAU forecast for 2020 to estimate the steel industry’s BAU and assuming that all emissions permits will be purchased externally, the costs to the steel industry could reach 1.3 trillion won, of which 85% will be borne by furnace firms.
A rebound to pre-crisis levels is unlikely and small mills and plate firms are at risk
The domestic steel sector bottomed in 1Q09 and is now recovering, but prices are unlikely to return to pre-crisis levels due to excess supply from China. As a result, domestic roughing mills that have been posting losses will continue to face considerable challenges.
Plate prices are likely to decline in 2010 due to the shipbuilding downturn and excess
supply. As a result, plate makers may face deteriorating profitability.
Major furnace firms will bear most of the costs related to Eco-Steel, and there is little
risk in terms of credit management.