Ukrainian steelmaker Metinvest expects robust Chinese demand for raw material to sustain in the second half of the year or even longer, while demand for semi products is still seen more as a temporary window of opportunity, CEO Yuriy Ryzhenkov said in an interview with S&P Global Platts on Sept. 8.
During the first six months of 2020, Metinvest saw a strong shift in its shipments of iron ore products from Europe to Southeast Asia and China. While the EU traditionally consumed some 45% of Metinvest's iron ore exports, the share fell to 18% in the first half. The volumes were redirected to Asia, Ryzhenkov said.
"Today we are selling almost 2 million mt of iron ore per month to Southeast Asia and China," the CEO said. The 2 million mt include resales of iron ore products manufactured by Metinvest's joint venture Southern GOK.
The company continues to see favorable pricing for its iron ore products. S&P Global Platts daily iron ore 62% Fe fines benchmark assessment was $129/dry mt CFR China on Sept. 8, which was 28% higher than at the start of the third quarter.
Metinvest mainly sells iron ore concentrate and pellet, which have both seen weaker spot premiums as base iron ore prices rose over the quarter.
In terms of product mix, Metinvest has seen a 25% drop in pellet output and shipments due to weaker premiums for pelletizing. This was caused by the general slowdown in the steel industry, particularly in Europe, the key market for iron ore products. Ryzhenkov noted that during difficult times, steelmakers tend to rely more on sinter.
He also expects higher sales of iron ore concentrate to continue. Contract pellet premiums have trended at a multi-year low, with even lower premiums in China's spot import pellet market, leading to a preference in selling concentrate and pellet feed at the margin.
In its steel segment, Metinvest expects its 2020 crude steel output to be more or less in line with 2019.
As Metinvest has traditionally exported more than 80% of its steel output, the 16% drop in Ukrainian steel consumption in H1 due to the pandemic had limited the impact on the group's overall sales. The pandemic impact was much more severe in exports, particularly to Europe.
Although the European market has bounced back from the H1 downturn, the recovery has been much slower than expected, the CEO said. The company's plate shipments to the EU, normally 90,000-100,000 mt/month, have been less than 50,000 mt recently.
The company added, however, it has managed to ramp up slab shipments to its own plate mills in Italy and the UK. Both facilities have started running close to their full capacity as soon as the severe lockdown was removed.
The CEO also noted the continuing slab demand from China, which started in H1 for the first time in a long time.
Metinvest is seeing demand recover from its Turkish customers, who have been buying mostly semi products (slab, billet), pig iron and hot-rolled coils.
Ukraine, Russia and Brazil have been exporting pig iron and hot-briquetted iron products into China since the second quarter on record high steel output and stronger utilization rates supporting imports into Asia at a time of weaker regional demand.
Chinese domestic ferrous scrap prices have remained supported, attracting metallics as well as semi-finished and finished steel products. A combination of higher prices and shipping rates, and a recovery in demand in regional steel markets may limit sales to China longer term, sources said.
