China’s infrastructure spending has aided the steel market’s recovery from the effects of Covid-19 shutdowns and is very likely to facilitate “a great prospective” for the consumption of steel and ferro-alloys used in infrastructure, delegates heard at Fastmarkets’ “Covid-19 and Asian ferro-alloys market” webinar on Tuesday June 30.
In a poll at the end of the second session of the webinar, 65% of respondents agreed steel and ferro-alloy demand will benefit significantly from China’s infrastructure investment, while 28% thought the benefit would be modest and only 7% of respondents estimated downstream demand would receive just slight support.
Infrastructure spending aids in China’s recovery
Real steel demand has fallen hard during the Covid-19 pandemic, which accelerated the downturn of consumption that was already evident in the second quarter of 2019. But China’s steel demand, especially that in the rebar sector, has rebounded at a pace never recorded before, Fastmarkets head of research Alistair Ramsay told delegates.
Rebar consumption, that had been struggling last year, recorded 14% year-on-year growth in April and 20% in May, Ramsay said. The sudden surge is linked to a rapid return to infrastructure spending, which not only supports basic steel, such as rebar and rods, but also a wide array of products including sections, plates, rail track and pipe, according to Ramsay.
Fastmarkets analysts have upwardly revised its finished steel demand forecast in China for this year by 30 million tonnes to around 900 million tonnes, reflecting the boost to building and infrastructure demand. This was compared to the team’s forecast of declining consumption earlier this year.
In the rebar sector, Fastmarkets analyst Una Yin predicts China’s rebar consumption will grow by 4.57% year on year in 2020, considering the impact from infrastructure spending.
Vanadium, silico-manganese demand underpinned
Rebar, as the top performer amid grand infrastructure spending plans in China, will benefit several ferro-alloys, especially vanadium, speakers told audience members at the webinar.
“With steel consumption likely to stabilize this year, supported by spending in infrastructure steels, we are going to see rebar consumption increase… Our ferro-alloys analysts believe there will be increased intensity of use in vanadium, such as in rebar,” Ramsay said.
Fastmarkets price analyst Amy Lv seconded Ramsay, pointing out one major driver behind strength in the Chinese vanadium market in the first half of this year was infrastructure spending stimulus amid expectations of inspections of the implementation of the latest rebar policy.
The rebar policy, which was first introduced in November 2018, requires steel mills to utilize greater volumes of vanadium alloys to meet new requirement on rebar strength.
Fastmarkets’ assessment for ferro-vanadium 78% V min, fob China recovered in late April and reached a year-to-date peak of $30-31.50 per kg on June 11. The price retreated to $29-30 per kg on July 2.
Lv also pointed out vanadium prices are lower compared with niobium, a substitution alloy in rebar production, causing some mills which previously adopted niobium to switch back to vanadium. This has been partially reflected in the sharp fall of niobium imports in March and April.
Citic Metal, the exclusive sales agent in China for ferro-niobium from Companhia Brasileira de Metalurgia e Mineração, has maintained its quarterly price for the July-September period at 205,000-225,000 yuan ($29,000-31,830) per tonne. It is equivalent to around $44.70-48.90 per kg, according to Fastmarkets’ calculations. Fastmarkets does not currently assess prices for ferro-niobium.
China imported around 11,499 tonnes of ferro-niobium in the first five months of this year, down by 49.2% from 22,619 tonnes over the corresponding period in 2019, according to China Customs data.
In addition, the decent margins in rebar give steel mills more spending power to stock alloys one month ahead, Ramsay noted.
Rebar prices in China have been rising amid intermittent fluctuations since early April. Fastmarkets’ assessment for steel reinforcing bar (rebar) domestic, ex-whs Eastern China climbed up to 3,630-3,660 yuan per tonne on June 8, the highest level since the Chinese New Year holiday (January 24-February 2). The price dipped slightly to 3,510-3,540 yuan per tonne on July 3.
“When the margin is a problem, maybe steel mills decline to use vanadium. In the current environment, the margin is slightly better… and vanadium is cheap, so it is a fantastic time to use vanadium,” Ramsay said.
The new infrastructure spending environment will lead to a 2-6% yearly growth in vanadium consumption in 2020, according to Ramsay.
Similarly, silico-manganese consumption, boosted by the increased production of infrastructure-related steel, is estimated to achieve a 2-5% annual growth this year, Ramsay added.
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