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Steelmaking raw materials: Market and Policy Developments

DSTI/SU/SC(2010)16 69th Steel Committee Meeting Paris 3-4 December 2010

Summary

Recovery in world output of steel has raised the demand for raw materials Miners have reacted by raising supplies However export restrictions have added strain on supply And raw material prices have risen significantly this year

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Price increases since the start of 2010

Iron ore and coking coal (contract) have risen by 80% and 62% respectively, Price of coke has increased by 57%. The price of ferrous scrap has increased by a somewhat smaller margin than other steel-related raw materials, doing so by 31% since the start of this year.
Index 2004=100 600

500

Scrap (USA)
Iron ore (contract) Coke (China)

400

Coking coal (contract)

300

200

100

0 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1

Iron ore demand strong in 2010

In the first three quarters of 2010, iron ore imports grew by almost 40% in Japan and Korea, and by nearly 60% in Chinese Taipei. China is the worlds largest importer of iron ore by far, accounting for approximately 70% of global imports. Demand for iron ore has been strong, though met mainly this year by local mine output not imports.
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Asian import reliance on iron ore

China Japan S.Korea

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Iron ore: Major Exporters

Brazil Brazilian output rose by more than a third in the first half of 2010, in year-on-year terms, supported by higher demand in traditional markets in Europe. Brazilian exports hit a record level in the third quarter of this year. Australia Australian production are also up significantly, supported by projects which started production in early 2010. In the first three quarters of 2010, Australian iron ore exports were up by 11%, with a small decline in shipments to China being more than offset by strong growth to Japan. India Indian supply of iron ore to world markets has contracted sharply recently, partly the result of higher export taxes on iron ore, growing domestic demand, and the export ban implemented by the state of Karnataka, which accounts for approximately one-third of Indian exports.

Iron ore: policy measures

India The India imposes a 5% duty on fines and a 15% duty on lumps (increased from 10% in April 2010). In July 2010, the Indian state of Karnataka started to ban exports of iron ore from ports controlled by that state to address illegal mining activities in the region. India requires that exports of high-grade iron ore (>64% Fe content) pass through state trading enterprises, with the state-owned Minerals and Metals Trading Company acts as a clearing house . China China has imposed an export duty on the sale of iron ore, which is reported to be 10%.

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Iron ore: policy measures (contd)

Vietnam The Vietnamese government increased the export duty from 20% to 30% in November 2010.

Argentina
Argentina imposes 10% duty. Malaysia Quantitative restrictions on iron ore also exist in Malaysia, in the form of non-automatic export licenses. Iran Iran has a ban on iron ore concentrate.

Coking coal: Major importers

China Although China is the worlds largest producer of coking coal, imports surged by more than 400%, to 34.7 million tonnes in 2009. India Indian imports increased by 11.3%, to 23.5 million tonnes in 2009. Strong growth in steelmaking capacity and production in coming years should raise Indias reliance on imported coking coal even further. Other countries Traditionally large importers, such as Japan, Europe and Korea, saw their imports fall in 2009, but growth has resumed during 2010 in line with strengthening activity in their steel industries.

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Coking coal: Major exporters

Australia Australian exports are up 24% so far this year, capacity expansions in Australia should support further export growth in the coming years. United States United States exports increased by nearly 70% during the first three quarters of 2010, though growth has slowed more recently in line with developments in market demand. Canada Canadian exports have also increased rapidly this year, particularly to Japan where shipments have increased by more than 50%. Russia Russia has recorded export growth of around 60% since the start of the year, despite reports of coal mine explosions in western Siberia earlier this year.

Coking coal and Coke: Policy measures

China has an export quota and tax (40%) on coke. As regards coking coal, China, Vietnam and Indonesia impose export duties.

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Scrap: Major importers

Chinese imports surged to 13.7 million tonnes from 3.6 million tonnes in 2008, as integrated producers purchased more scrap owing to the favorable price relative to imported iron ore at the time. S.Korean mills also purchased more imported scrap in 2009. Although Turkish imports fell sharply in early 2009, they have been recovering since then.
Import of ferrous scrap during 2000-2009 Imports
EU
China 15 Taipei

20

mmt

Turkey
S.Korea

10

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Scrap: Major exporters

U.S. scrap exports for 2009 as a whole rose to 22.4 million tonnes, supported by an increase in exports to China. Japan recorded a new high in scrap exports in 2009 driven by increases in shipments to China, South Korea and Chinese Taipei. Prohibition of scrap shipments through some ports during MarchOctober 2009 may explain part of the drastic, 77% decline in Russian scrap export last year.
Export of ferrous scrap during 2000-2009 Exports
EU 20 Ukraine Russia USA

25

mmt

Japan
15

10

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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Scrap: Policy measures

Trade in scrap is affected significantly by a large number of government measures. According to some news sources, the Iranian government is considering increasing its scrap export duty from 50% to 70%. South Africa and Ukraine have introduced non-automatic export licences as well as export registration requirements and fees.
Export taxes on scrap in selected countries
Country Argentina China Egypt India Iran Kazakhstan Kenya Malaysia Russian Federation Ukraine Vietnam United Arab Emirates Tariff Rate 20% 40% 500 to 1500 EGP/t 15% 50% 15%, minimum of 20 EUR/t 25% 10% 15%, minimum of 15 EUR/t 16.4 EUR/t 25% Dirham 250/t

Scrap: Policy measures(contnd)

South Africa and Ukraine have introduced non-automatic export licences as well as export registration requirements and fees.

Quantitative restrictions on scrap in selected countries

Country Argentina South Africa Azerbaijan Indonesia Jordan Kazakhstan Kenya Malaysia Sri Lanka Ukraine Uruguay Type of measure Temporary export ban Export permit Export ban Export ban Export ban Export quota Export ban Non-automatic export license Export ban Export license Export ban