The year 2017 was marked by continuous price increases for all products, driven by strong demand for raw materials. It is assumed that US import restrictions will continue in the coming years. Export volumes from China have fallen sharply and China‘s presence in Asian markets is expected to increase.
In 2017, 1,700 million metric tons of crude steel worldwide were produced. Compared to 2016, which was partly accompanied by irrational price surges, this year has been dominated by a continuous increase in prices for all products. This development started in the second quarter and the trend continued until the end of 2017, with no significant price declines. It started with a massive demand for raw materials, accompanied by a shortage of electrodes. The price of electrodes has more than doubled. This glaring rise had an impact on production costs and pushed the price spiral further up. Iron ore prices were also significant, surpassing the magic mark of $ 90 CFR China. A similar development has also been observed in scrap ex USA, with quotations of over $ 360 CFR Turkey, also finding buyers. As in previous years, we have seen further compartmentalization through anti-dumping measures, and it is expected that these restrictions will continue to protect local producers in the coming years. Although these measures were initiated primarily against Chinese suppliers, they are now stretching across the globe.
As in previous years, China was one of the key markets with a significant impact on our trading activities. In this context, it is noteworthy that the ten largest Chinese steel producers generated a volume of 307 million metric tons of steel in 2017. It is also notable that exports from China decreased by approx. 35%, to an export volume of approx. 75 million metric tons. Although China was one of our main supply sources, the share of purchases has declined in recent years. In particular, flows of semi-finished goods to markets outside of Asia virtually came to a standstill. It remains to be seen, whether the trend of China strengthening its presence in Asian markets and at the same time, being pushed back on deliveries of semi-finished products, will continue.
While the US was still one of our most important sales markets in 2016, the situation has changed significantly this year. Although the import volume in the USA rose to 38 million metric tons, we were unable to match the previous year in terms of volume. The reason for this was the initiative Section 232 „Investigation on the impact of steel imports on national security“. The decision of President Trump, within Investigation 232, may result in measures such as import restrictions, import taxes and quota regulation. Consequently, we were forced to reduce our sales of reinforcing steel. Since a decision by President Trump is to be expected by mid-April 2018, we will not be able to resume our activities until the second quarter of 2018.
Turkey was one of our major trade partners last year. In this market, we managed to sell significant amounts of billets. However, unlike in 2016, our deliveries came not from China but were dominated by producers in Russia and Ukraine. As Turkey is one of the most important import markets for scrap, the attractive price level of scrap also favored our deliveries of billets, allowing for interesting trade margins. In addition to the importance of Turkey as a sales market, Turkish producers are one of our main supply sources for reinforcing steel to the USA, although our targets could not be reached because of the already described issues.
The definition of the Gulf States as target markets had a positive impact on results, especially in 2017. We were able to broaden our product range for the deliveries to the United Arab Emirates. As a result of this diversification, new customer segments were also served. Less satisfactory was our business in Saudi Arabia, where our defined goals were not met.
Due to intensive market cultivation of African markets, we were able to grow both, in terms of volume and earnings. Especially in the Senegal and Benin markets, we were able to significantly improve our results, because we have started a cooperation with local partners, which enables us to penetrate another niche of the sales market. Therefore, we will continue to define Africa as a potential market in 2018 with the goal of establishing a further warehousing cooperation with a strategic partner.
Nevertheless, in our purchases of scrap ex Rostov, we faced significant delays in delivery in the third quarter, which eventually resulted in a fraud case. Nevertheless, we would like to exploit the scrap trading experience gained in previous years and are in discussion with new partners, to continue exports. Even in the new constellation, the sales market Turkey will have a significant importance.
Depending on the freight market, Greece and Italy could also be supplied as sales markets.
In order to seize the opportunities of the business activities’ expansion, the leadership of the department was strengthened by the nomination of Dr. Wolfgang Aschauer. This will support us especially in acquisitions in Eastern Europe, the expansion of the scrap business and the expansion of sales functions in African countries.