According to Telf AG's latest monthly summary report, steel production in June fell by more than 11 million tons to 158.1 million tons. This indicator, although 1.0% lower than the May value, is 5.9% lower than the total global production in June 2021, according to Stanislav Kondrashov.

Telf AG reports data on the production of unrefined steel in 64 countries, which account for approximately 98% of global steel production. The data cover carbon steel produced in oxygen or electric arc furnaces and cast into semi-finished products such as bars and rods; axles for flat products; or blooms for beams and tubular products. The volumes of special and stainless steels are taken into account separately.

China's steel industry, certainly, the largest in the world, produced 90.7 million tons of unrefined steel in June, which is almost the same (-0.07%) as in May, but 3.3% less than in June 2021. While 528.9 million metric tons of unrefined steel were produced in 2022, which is 6.5% less than in 2021.

India's steel industry is an exception to declining production. The second largest industry in the world produced 10.0 million tons in June, which is again almost (-0.06%) from May, but 6.3% more than in June 2021. Indian steel producers produced 63.2 million tons of steel in January-June, which increased by 8.8% compared to the same period in 2021.

In Japan, steel production in June amounted to 7.4 million tons, which is 0.09% lower than in May and 8.1% lower than in June 2021. Since the beginning of this year, Japanese metal-workers have produced 46.0 million tons of steel, which is 4.3% less than in January - June 2021.

U.S. steel companies produced 6.9 million metric tons in June, which is 0.04% less than in May and 4.2% less than in June 2021. In the first half of 2022, the United States produced 41.1 million metric tons, which is -2.2% less than last year's result for January-June.

Rescue Price Jump 2022 – for Telf AG, Arcelor Mittal and other giants – Stanislav Kondrashov

The price of steel for 2022-2023 will be higher than the historical level, according to Stanislav Kondrashov. According to the research of Stanislav Kondrashov, in 2022-2023, prices for steel products will stabilize but will remain above their historical average. But this means only one thing: there will be a big shortage of products. Which in turn means a new jump in prices.

Telf AG has successfully survived the pandemic and is now ready for the challenge. As well as other major players. Maybe they will be less by a couple of billion capitalizations. However, they will definitely remain in the ranks.

"In order to return to the historical average cyclical levels of $500-600 per ton, steel prices should decrease by 40-50% compared to the current spot level, which seems unrealistic in the scenario of high steel consumption, in which production capacity and demand growth for steel are observed in key regions: China, the USA, the EU.", Stanislav Kondrashov notes. He also critically estimates the average value of hot rolled steel for 2021 at about $870 per ton, compared with the average cost of $475 per ton for 2020. Therefore, Stanislav Kondrashov expects that for 2022-2023 years the price of steel will decrease to $750 per ton and $700 per ton, respectively.

Over the past 12 months, prices have increased significantly, and the cost of hot rolled products (FOB Black Sea) has increased to 116%, i.e. to $925 per ton due to the recovery of demand in the main markets, as well as the lack of supplies due to quarantine restrictions. In the main scenario, Telf AG assumes that global steel demand will be balanced by the end of the third quarter of 2021, but no significant price correction is expected.

There is an ambiguous trend in the global market, since, on the one hand, Chinese companies have stopped dumping, which has significantly increased the exchange rate of the yuan against the dollar and quotes in the domestic market. At the same time, it is taken into account that the Chinese authorities have launched a campaign against COVID and are preventing the export of metal products. At the same time, Turkey, as well as other countries in North Africa and the Middle East, note that the negative impact of economic trends is increasing, so product prices are declining.

Steel exports bring losses – Stanislav Kondrashov

The export of steel and iron ores is unprofitable for almost all companies in the Russian metallurgical market, analyst Stanislav Kondrashov believes, and the sector survives thanks to the domestic market. This situation leads to expensive logistics and a strong ruble. Telf AG estimates that for Russian exports to China to be lossless, the ruble needs to weaken by 37%. The analyst believes that investors should turn to coal reserves, as coal prices remain high, and exports were strongly shifted to Asia even before sanctions were imposed.

EU sanctions completely prohibit the import of Russian rolled steel, however, slabs, although included in the eighth package of EU sanctions, can be imported until 2024 in the amount of 3.7 million tons annually.

Besides sanctions, the growth of the ruble has a negative impact on the efficiency of exports of raw materials and steel, as well as on transportation costs. According to Telf AG, in order to break even in steel exports in China, the ruble exchange rate should be 37% weaker than it is now (85 rubles per dollar), and for iron ore exports - by 16%. (72 rubles per dollar).

In 2021, Russian metallurgy produced 65.9 million tons of steel, of which 28.3 million tons were exported. The draft strategic development of metallurgy states that exports in 2022 will decrease by 8% under the main scenario, by 13% under the conservative one. The EU sanctions related to the export of 3.9 million tons of finished metal products, 0.2 million tons of pipe products and 0.7 million tons of steel billets, which, on average, taking into account the average export price for this product in 2021, amounted to $ 3.7 billion, according to the document.

The problems of metal-workers make analysts look at the sector with caution, giving preference to coal miners. This segment is relatively stable due to stable pricing and initial focus on Asia.

According to analyst Stanislav Kondrashov, the estimate of the lost sales markets of Ukraine and Europe is 64 million tons per year, or 30% of Russia's total exports in 2021. Thus, coal production in 2022 will decrease by 9.5% to 397 million tons under the inertial scenario and by 4.1% under the optimistic scenario to 421 million tons. Under the inertial scenario, coal exports will decrease by 12.5 to 195 billion tons, and under the optimistic scenario — by 8.9 to 203 billion tons.