Kallanish Steel Conference - Antwerpen (Belgium), June 2018


  • The distribution of steel flows in the world is in the middle of an upheaval. As a result of the tariffs imposed by the USA, many products tend to turn away to, or stay in Europe. Prices have increased in the United States, causing economic hazards for highly-consuming industries (automotive...) but also bringing about opportunities to raise prices and margins for American steel producers or those implanted in the USA. Nucor, ArcelorMittal and Vallourec are benefitting from this favorable situation
  • Europe's consumption has kept satisfactory levels for two years, going back almost to the situation of 2006-2007, pre-financial crisis, with prices also well-oriented (but not yet excessive!). Demand is buoyant in every traditional steel sector: construction, mechanics, oil & gas, automotive... Russian producers are thinking of buying out capacities in Europe to circumvent the retaliation measures undertaken by the EU after the Ukrainian crisis
  • Turkish producers are unable to meet their strong domestic demand (automobile, construction, household appliances...). So, steel imports maintain at a high level. In parallel, exports were able to resume to the EU, which resolved its customs dispute with Turkey. This country remains a major scrap importer
  • China is methodically conducting its capacity-reduction programme (about 50% of the world's steel capacity is in China, but also the equivalent for demand). Thus, excess capacity is estimated at 200 Mt/yr. 140 Mt of induction furnaces were closed down in 2017, but replaced in half by electric arc furnaces. The capacity of the EAF route now reaches 160 Mt/yr and continues to grow vigorously, resulting in high consumption of scrap metal, including local (demolition of buildings or cars) and in the need to install new shredders (about 900 units). Electrodes form a bottleneck to satisfy this new appetite for the EAF technology
  • ArcelorMittal hopes to finish up the acquisition of Ilva, at the cost of major remedies in the form of divestments in other European countries (Romania, Luxembourg, Macedonia...). This acquisition would allow it to increase its market share in the second-largest market in Europe and to enrich its range of flat products
  • Antwerp is the largest port for steel imports and exports in Europe: 8.5 Mt/yr

 

Snapshots of the World Oil Summit - Paris, April 2018


 

  • The oil market seems to have come back to a certain balance, with the global 2014-2017 surplus being now wiped out. Prices have been multiplied by more than 2 from their lowest
  • The International Energy Agency envisages continued growth in demand and production at least until 2023, petrochemicals, India and China representing the staples of additional demand
  • The equivalent of a "North Sea" (3 million barrels/d) must be replaced every year to make up for the natural decline in conventional production and also to meet the additional demand (+ 1 million barrels per year). In this regard, the advent of non-conventional American producers is not generally regarded with much concern. The more uncertain situation of major producers such as Nigeria, Libya and Venezuela is, however, a major volatility factor on supply, despite the agreement between OPEC and Russia which has been extended
  • In the long run, after 2025, demand could level off, but a brutal decline is difficult to envisage by many players, because oil is - and will certainly remain for long - still little substitutable in transport and chemistry, despite the efforts currently being undertaken in biofuels, electric mobility and biosourced chemistry. The penetration of electric vehicles is proving in particular, slower than expected
  • Producers as a whole are committed to maintaining rigorous cost management in the future, despite the rise in oil prices
  • Many projects are becoming profitable from $50/barrel and could soon be revived (even offshore projects, from $70-80/barrel)
  • The oil production sector is becoming increasingly open and international, with players back in the limelight, like Pemex, after heavy investments, or Morocco, a new actor, who presented an impressive list of potential finds. Through LNG, flows of natural gas are also expanding on a global scale. Natural gas is thus increasingly being considered by many producers as an essential growth relay, alongside oil. Investments in natural gas from major companies such as Total or Shell, have been massive in recent years
  • OEMs, engineering and service companies (CGG, Subsea 7, Technip, Vallourec, Saipem...) have managed to get through this difficult phase at the expense of massive restructuring (a decrease of about 30% in costs) and the implementation of breakthrough working methods throughout the project development process, both internally and with their suppliers. Digitalization, even artificial intelligence, have been strongly used to achieve this « revolution » ; but some of the cost efforts were temporary and are not sustainable in the long run according to these companies, which are of the opinion that they can only survive if their prices now rise by about 25%. With the slow recovery underway, they could achieve this aim

 

 

Echoes from the Platts Petrochemicals Conference in Rotterdam - February 2018


 

  • More upbeat atmosphere than two years ago, for this conference which brought together many industrials and customers of the European and global petrochemical scene, at Platts' initiative
  • The reason for this optimism is simple: the vast majority of plastic-using sectors have restored their profitability and are now contemplating the future with confidence. In particular, they are considering solid sales growth in their respective markets. Consequence? The demand for polyethylene and polypropylene is expected to rise in the next five to ten years, particularly in China
  • This view has however to be mitigated, because announced industrial projects are a dime a dozen (especially in the USA) and could lead to overcapacity. This was the standpoint of many stakeholders, especially with respect to ethylene, whose prices could be depressed for a few years. Supply-demand balance and price prospects are on the other hand a priori more favorable for PP
  • Costs strongly compressed by a very abundant naphtha and above all, a boon of co-products of shale gas (ethane, propane). The United States should continue to ramp up its production of shale oil and gas, bringing about a glut of raw materials. The supply chains based on ethane and propane (particularly present in the US) should enjoy a significant competitive advantage over the naphtha-based plants (more numerous in Europe, in particular). Will the US keep all this resource for itself ? Probably not. As an illustration, the first export of ethane to Europe by freighter was noticed recently
  • China is the only major area to develop a large-scale coal-based chemical industry, on the grounds of sovereignty and the exploitation of local resources
  • End-customers are increasingly sensitive to three trends: the customization of plastic products to their needs (devising "solutions"); recycling intensity; and the use of renewable raw materials (green chemistry). Innovation and flexibility should remain the mainstays of the world petrochemical industry!