SCRAP & IRON ORE MARKETS

FOCUS WEBINAR
13th January 2021 | 13:00 GMT

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Today we will cover:

• Scrap & Iron Ore Markets Jan ‘21

– Presented by Tomas Gutierrez, Asia Editor,
Head of Data

• Turkish Scrap Price Outlook

– Presented by Burcak Alpman, Reporter

We will save time at the end for questions, but if we don’t get to your question due to time constraints we will
endeavor to answer you after the webinar.

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Scrap & Iron Ore Markets Jan ‘21
Tomas Gutierrez – Asia Editor
13 Jan 2021

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 Iron ore remains elevated

190

170

150

130

110

90

70

50
20

20

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21
0

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02
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10

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KORE 62% Fe KORE 65% Fe KORE 58% Fe

Source: Kallanish, USD/dry metric tonne cfr Qingdao

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The Covid threat

China has become jittery after new Covid-19 cases hit the highest level since the summer

• Will the New Year holiday be affected?

• Will new transport restrictions be imposed?
• Will there be a lockdown?
300

250

200

150

100

50

0
7/1/2020 8/1/2020 9/1/2020 10/1/2020 11/1/2020 12/1/2020 1/1/2021
Daily new cases

Source: Our World in Data, CSSE at John Hopkins University

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Steel prices fluctuate, but fundamentals firm

Steel market inventories have retreated to healthy levels

20
18
16
14
12
10
8
6
4
2
0
7/2/2020 8/2/2020 9/2/2020 10/2/2020 11/2/2020 12/2/2020 1/2/2021
Rebar Wire rod HRC

Source: SMM, Kallanish (million tonnes)

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2021 should see strong Chinese output
2020e 2021f Y-o-y

Crude steel output 1,050 1,080 2.90%

Exports 54 70 29.60%
• Chinese steel output is expected to
Imports 39 20 -48.70%
be strong despite weaker steel
Apparent demand 983 976 -0.70% demand.
End user demand 983 978 -0.50%
• A slight downturn in demand and
Finished steel demand from:
higher output means prices will
Automotive output 43 44 2.30% link with international levels.
White Goods 16 17 6.50%
• But stronger global demand means
Shipbuilding 13 13 4.00%
prices internationally may be
Energy 32 34 6.30% supported.
Engineering 160 165 3.10%

Construction 346 341 -1.40%

Infrastructure 220 215 -2.30%

Source: Kallanish China Steel Intelligence December 2020

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China hopes to resume delayed restructuring

% of steel demand generated by sector:

62% 10.5% • ‘Dual circulation’ implies growth in
61% domestic consumption
60% 10.0%
• Becoming a prosperous society
59%
9.5% requires a higher return on
58%
investment
57%
9.0%
56% • Avoiding financial risk means
55% 8.5% reducing state-led overspend
54%
53% 8.0% • IMF: China’s general government
2017 2018 2019 2020 2021 deficit hit 18.2% in 2020, from
Real estate and infrastructure (LHS) 2.6% in 2019
Consumer (RHS)

Source: Kallanish China Steel Intelligence December 2020

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Ex-China steel output is recovering

100,000

90,000

80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

-
European Other C.I.S. (6) North South Africa Middle East Asia China Oceania
Union (28) Europe America America excluding
China
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20

Source: World steel, thousand tonnes

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Implications for iron ore

• China’s iron ore demand will remain high, while demand outside China will grow

• China’s steel prices will not support global prices, leaving margins under pressure

• Recovered iron ore supply means prices will eventually fall back from current levels

• Prices should remain higher than previous expectations however

• Prices could still be volatile through the year

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Turkish Scrap Price Outlook

Burcak Alpman, Reporter

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World Steel Industry
Top 10 Crude Steel Producers in 2020 (Jan.-Nov.) Scrap Consumption in H1 2020

Countries July (mill. mt) Countries 2020 (mill. mt) Trend

China 961.158 China 93.75 -7.3%

India 89.393 EU-28 39.812 -13.3%
Japan 75,669
USA 20.2 -18.9%
U.S.A. 66.073
Russia 14. 551 -7.3%
Russia 65.182
S. Korea 60.800 Japan 14.294 -19.8%

Germany 32.521 Turkey 13.658 -4.3%

Turkey 32.360 S. Korea 13.569 -8.3%
Brazil 28.085
Source : Worldsteel, BIR
Vietnam 26.609
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Turkish Steel Production

Turkey’s Crude Steel Production by Process

100%
90%
80%
70%
23,752 20,482 21,846 25,963 25,799 22,884 22,299
60%
50%
40%
30%
20%
10,283 11,035 11,317 11,561 11,513 10,859 10,060
10%
0%
2014 2015 2016 2017 2018 2019 2020-11 mnth

Blast Furnace Electric Furnace

Mill. mt
Source : TCUD

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Turkish Scrap Consumption (11-month)

Domestic vs. Imported

23.3%
Scrap consumption (mmt)

2019-11m 2020-11m Change (%)

Imported scrap 16.81 20.10 19.5

Local scrap 7.66 6.10 -20.3

TOTAL 24.47 26.20 7.1 76.7%

Domestic Imported

Source : SteelData

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Turkish Scrap Imports (Jan. – Nov. 2020)
M.E
N. Africa
1.7%
2.0% Other
2.8%
CIS USA
11.1% 19.8%

EU
62.7%

Source : TCUD

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 190
240
290
340
390
440
490
540
(USD)
01 Jan 2020
10 Jan 2020
19 Jan 2020
28 Jan 2020
06 Feb 2020
15 Feb 2020
24 Feb 2020
04 Mar 2020
13 Mar 2020
22 Mar 2020
31 Mar 2020
09 Apr 2020
18 Apr 2020
27 Apr 2020
06 May 2020
15 May 2020
24 May 2020
02 June 2020
Imported Scrap Prices

11 June 2020
20 June 2020
29 June 2020
08 July 2020
17 Jul 2020
26 Jul 2020
04 Aug 2020
Baltic & US origin HMS 80:20 cfr Turkey

13 Aug 2020
22 Aug 2020
31 Aug 2020
09-Sep-20
18-Sep-20
27-Sep-20
06-Oct-20
15-Oct-20
24-Oct-20
02-Nov-20
11-Nov-20
20-Nov-20
29-Nov-20
Source : Kallanish

08-Dec-20
17-Dec-20
26-Dec-20
16

04-Jan-21
13-Jan-21
What happened recently? (Scrap)
Baltic & US origin HMS 80:20 cfr Turkey
Strong scrap demand
520.0

470.0
Tight scrap supply
420.0

370.0 EUR/USD at highest since 2018

320.0

270.0
Iron ore at historical highs

220.0
Shredded gains premium
7 Jan. 2021
01 Oct. 2020
8 Oct. 2020
15 Oct. 2020
22 Oct. 2020
29 Oct. 2020
5 Nov. 2020

3 Dec. 2020
10 Dec. 2020
17 Dec. 2020
24 Dec. 2020
31 Dec. 2020
12 Nov. 2020
19 Nov. 2020
26 Nov. 2020

Suppliers unable to secure sold material

Price (USD)

Source : Kallanish

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What happened recently? (Rebar & HRC)
(USD/mt)

850.0 Demand recovers

800.0
HRC
750.0 Supply remains insufficient
700.0
Rebar
650.0 Confidence returns in the global market
600.0

550.0 Prices hit record highs

500.0

450.0
Concerns rise amid lower imported HRC offers
400.0
1 Jan. 2021
8 Jan. 2021
13 Jan. 2021
02 Oct 2020
09 Oct 2020
16 Oct 2020
23 Oct 2020
30 Oct 2020
06 Nov 2020
13 Nov 2020
20 Nov 2020
27 Nov 2020
04 Dec 2020
11 Dec 2020
18 Dec 2020
25 Dec 2020

Rebar producers suffer

Source : Kallanish

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 150.0
190.0
230.0
270.0
310.0
350.0
390.0
430.0
470.0
510.0
550.0
590.0
630.0
670.0
01 Jan 2018
29 Jan 2018
26 Feb 2018
26 Mar 2018
23 Apr 2018
21 May 2018
18 Jun 2018
16 Jul 2018
13 Aug 2018
10 Sep 2018
08 Oct 2018
05 Nov 2018
03 Dec 2018

Rebar, FOB Turkey

31 Dec 2018
28 Jan 2019
25 Feb 2019
25 Mar 2019
22 Apr 2019
Scrap & Rebar Prices

20 May 2019
17 Jun 2019
15 Jul 2019
12 Aug 2019
09 Sep 2019
07 Oct 2019
04 Nov 2019
02 Dec 2019
30 Dec 2019
27 Jan 2020
24 Feb 2020
23 Mar 2020
20 Apr 2020
HMS 80:20, cfr Turkey

18 May 2020
15 Jun 2020
13 Jul 2020
10 Aug 2020
07 Sep 2020
05 Oct 2020
02 Nov 2020
Source : Kallanish

30 Nov 2020
28 Dec 2020
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 100.0
120.0
140.0
160.0
180.0
200.0
220.0
240.0

80.0
01 Jan 2015
23 Feb 2015
17 Apr 2015
09 Jun 2015
01 Aug 2015
23 Sep 2015
15 Nov 2015
07 Jan 2016
29 Feb 2016
22 Apr 2016
14 Jun 2016
06 Aug 2016
28 Sep 2016
20 Nov 2016
12 Jan 2017
06 Mar 2017
28 Apr 2017
20 Jun 2017
12 Aug 2017
04 Oct 2017
26 Nov 2017
18 Jan 2018
12 Mar 2018
04 May 2018
26 Jun 2018
18 Aug 2018
10 Oct 2018
02 Dec 2018
24 Jan 2019
18 Mar 2019
10 May 2019
02 Jul 2019
24 Aug 2019
16 Oct 2019
Scrap – rebar margin (Jan. 2015-Jan. 2020)

08 Dec 2019
Source : Kallanish
$174.2
Average margin

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 120
125
130
135
140
145
150
155
160
165
170
175
180
185
190
195
200
01 Jan 2020
12 Jan 2020
23 Jan 2020
03 Feb 2020
14 Feb 2020
25 Feb 2020
07 Mar 2020
18 Mar 2020
29 Mar 2020
09 Apr 2020
20 Apr 2020
01 May…
12 May…
23 May…

2017
since
March
Lowest
03 Jun 2020
14 Jun 2020
25 Jun 2020
06 Jul 2020
17 Jul 2020
28 Jul 2020
08 Aug 2020
19 Aug 2020
30 Aug 2020
10 Sep 2020
21 Sep 2020
02 Oct 2020
13 Oct 2020
24 Oct 2020
04 Nov 2020
15 Nov 2020
Scrap – rebar margin - (Jan. 2020-today)

26 Nov 2020
07 Dec 2020
18 Dec 2020
29 Dec 2020
9 Jan. 2021
Source : Kallanish
Avg. cost
Avg. margin

$168

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Current margin
Recent highlights

China allows scrap imports

Russia raises scrap export duty

The EU announces A/D duty for Turkish HRC

Russia considers export duty for billets

Turkey signs FTA with the UK

EUR/USD at highest since 2018

US and EU scrap rise sharply

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 Millions

0
1
2

0.5
1.5

-0.5
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
2000-2020
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08

export
Jul-08
Jan-09
Jul-09
Jan-10

import
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
China’s historical scrap trade

net imports

Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Source : Chinese customs, GTT

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Outlook – Semi and finished steel

Global flat steel supply to remain tight

US imports to recover

Steel production to pick up

Idle capacities to further resume

China’s EAF output to rise

Rebar producers’ margins to squeeze

China to make a strong start

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Outlook – Scrap

Supply to remain tight, demand to rise

Russia to export less scrap

China’s scrap imports not to exceed 2009

US market to remain strong

Further scrap export bans to follow

Turkish rebar producers no more alone

Prices to see a correction in the near term

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Questions?

If we don’t have time to answer all the questions, we will endeavor to contact you and
answer them after the webinar.

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Upcoming Events & Webinars
• Global Steel Markets Webinar
– 20th January 2021
– Registration Open
– Free
• International Steel Scrap 2021 Virtual Conference
– 10th March 2021
– Registration Open
– $250 per delegate
• Asia Steel Markets 2021 Virtual Conference
– 21-22 April 2021
– Registration Open
– $295 per delegate

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SCRAP & IRON ORE MARKETS
FOCUS
13th January 2021 | 13:00 GMT

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