Basic Iron and steel in UK – Analysis

Headlines

• UK’s basic iron and steel market contracted by 6.8% to £10.6 billion in 2013 as prices of steel declined due to the overcapacity in steel production
• Industry of structural metal products increased its purchase of steel due to the growing private housing sector in UK in 2013
• Motor vehicles, trailer and semi-trailers decreased their share of purchases in the industry by 12% as it is substituted with aluminium in pursue of lower CO2 emissions
• In 2013 EU Commission creates Communication Action Plan for a development of competitive and sustainable steel industry in Europe
• Basic iron and steel industry is expected to continue falling by 2% in 2014 due to oversupply in UK steel production and iron ore mining globally

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MArket Trends

• Basic iron and steel market in the UK declined by 6.8% to £10.7 billion in 2013. Although the main buyer in the industry – structural metal products increased its share of purchases over the year, the industry still felt the pressure from overcapacity and declining prices of steel in Europe.
• Structural metal products producers were the key buyer in the basic iron and steel industry accounting for 18% of the B2B purchases which stood at £1.9 billion in 2013. The share increased usage in construction sector which was boosted by the rapidly growing private housing segment and overall construction output in the UK. Private Housebuilding was driven by the government’s deposit guarantee programme Help to Buy designed for purchases of new homes in the UK.
• Motor vehicles, trailer and semi-trailers accounted for 12% of the purchases in the industry. Despite a 1.3% increase in number of vehicles manufactured, acquisitions of basic iron and steel declined by 12%. Demand of steel from automotive industry is declining due to increasing use of aluminium. Vehicle manufacturers are reducing vehicle weight in order to cut CO2 emissions in order to comply with new EU standards.
• Basic iron, steel and ferroalloys accounted for 46% of the market size in the industry in 2013. After experiencing a 2% decrease its market value stood at £4.9 billion. The decline was determined by the decreasing prices of steel products. HRC Europe steel prices declined by 6.4% in 2013 due to oversupply of steel in the global market.
• As well as global steel market, the European market has been confronting a growing overcapacity of steel production and declining demand over the recent years. To address the issues of struggling EU market of iron and steel industry, an EU-wide plan named Commission Communication Action Plan for a sustainable and competitive steel industry in Europe was created on June, 2013. Currently, the plan is offering to reduce or remove electricity feed-in tariffs related to renewable electricity on energy-intensive industries to make them more competitive internationally.
• In 2013 import penetration fell by 9% and accounted for 65% of the market size reaching value of £5.8 billion. The imports decreased due to the overcapacity in the global steel production and restart of Teesside steel plant which increased the output of steel in the country in 2013.
• Currently active antidumping duties on Chinese wire rods are about to expire. In April, 2014 European steel association Eurofer inquired for an over 20% anti-dumping charge for Chinese wire rod in order to protect EU producers. The new query will prolong the duty by approximately 15 months until the answer is given.

production Trends

• Overcapacity has been pressuring UK’s as well as the global iron and steel market. Production capacity of steel increased by 118 million tonnes over the last two years and is expected to total in 2,2 billion tonnes in 2014. However, UK’s production decreased only by marginal 1% over 2013. Though different segments managed to grow as e.g. production of basic iron, steel and ferroalloys recorded a 2% increase and accounted for 62% of total industry’s production.
• While the industry has marginally declined some companies managed to increase their production. E.g. Teesside Steel Co owned by Thailand SSI renewed its production in the UK in 2013. In addition, during the same year Teesside Steel Co recorded its production record in Red car plant after expanding its production capacity. The steel output in the industry was also supported by improvements of the Tata Steel’s Port Talbot plant. Its blast furnace was rebuilt increasing steel production over the same year.
• Recycling of metal waste and scrap industry accounts for 16% of basic ferrous and non-ferrous industry costs in UK. Approximately 13 million tons of scrap met