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Presentation at ISS 2021
15 April 2021
Nae Hee Han | Director, Economic Studies
COVID-19 and the steel industry
▌Contents
2
The pandemic’s impact on steel demand
worldsteel’s response to COVID-19
Looking beyond the pandemic
Conclusion
▌Click to edit Master title style
3
The pandemic’s impact on steel demand
▌ Global steel industry perspective as of October 2020
4
Steel demand, finished steel (SRO October 2020)
-5.5
-10.0
5.9
-4.0 -3.0
0.4
-3.5 -2.4
5.1 4.01.3
-15.2
4.0
-9.0
-15.3
-10.1
-16.0
-19.5
-12.4-14.1
8.0
-2.4
11.0 11.9
5.5 6.78.2 9.3
6.25.3
14.7
0.0
4.1
-25
-20
-15
-10
-5
0
5
10
15
European Union(28)
Other Europe CIS USMCA Central & SouthAmerica
Africa Middle East Developed Asia Developing Asiaexcl. China
China World
% 2019* 2020 2021
2021 (Mt)
149.2 39.3 56.5 122.2 40.5 33.4 40.9 127.9 980.1 1,795.1198.7
*World growth rates based on adjusted Chinese growth rates
▌Key updates on the SRO
5
April 2021 SRO shows a further improvement for steel demand in 2020 compared to the October 2020 forecasts for both developed and developing economies.
Despite a benign global figure, double-digit declines in steel demand were seen in many countries in 2020.
Emerging economies were more vulnerable to the pandemic due to stricter confinement measures, falling raw materials prices, collapses in tourism, insufficient fiscal support.
In 2021, a healthy recovery is expected in both developed and developing economies.
Steel demand in developing economies is expected to rebound more strongly than in developed economies and is expected to return to the pre-pandemic level in 2021. For developed economies, it will probably take longer.
A stable recovery is expected to continue into 2022 with some moderation of growth.
Uncertainty in the evolution of the pandemic and vaccination raises both upside and downside risks.
▌Steel use in 2022 as % of 2019
6
Steel demand, finished steel (SRO April 2021)
141.9
113.5 112.8 112.4 109.5103.6 101.8 100.1
99.7 99.2 96.793.0 92.4
80
90
100
110
120
130
140
150
Turkey China France Brazil India Russia Germany Mexico ASEAN(5)
SouthKorea
Italy Japan UnitedStates
2019=100
Evolution of the pandemic and delays in vaccination
Recovery beyond pent-up demand
Reversal of fiscal and monetary policy stances
Geopolitics
▌Uncertainties and risks
▌GFC vs COVID-19 impact compared
8
The COVID-19 crisis leaves less impact on steel demand than GFC
-3.2
-24.3
-17.2
-4.0-1.3
-6.3
-4.4-13.5
-5.1
-3.1
-3.6
-2.4
-25.0
-20.0
-15.0
-10.0
-5.0
0.0
Construction
Automotive
Mechanicalmachinery
Investments
GDP
Steel demand
20092020(est)
23.4 12.5
-24.44.9
-35.0
-35.98.0 -20.2
-10.1
-16.8
-15.2
-15.3
-40-30-20-10
0102030
China
India
Central & South America
MENA
European Union (28)
USMCA
Source: IHSMarkit, worldsteel October 2020 SRO
▌worldsteel’s response to COVID-19
9
▌worldsteel’s SHCO response to COVID-19
10
First Guidance noteMarch 2020
Steel Safety Day postponed until October March 2020
First call with members to improve guidance note
April 8, 2020
Webinar 3M Personal Protection Equipment
May 13, 2020
Second call with members (back to workplaces)
May, 2020
Webinar Mental HealthJune 4, 2020
Ongoing upload of resources to Extranet
Experiences from worldsteel members to ensure business continuity:
• Communication• Workplace hygiene• Promote social distancing • Working from home• General practices involving on-site medical staff• Workplace hygiene (shop floor oriented)• PPE and other controls• Scheduling and staffing • General practices involving frontline broader stakeholder
groups
▌worldsteel guidance note
▌Recommended critical controls
12
▌Results from the COVID-19 survey 2021
▌worldsteel members survey 2021
How the pandemic affected the number of EMPLOYEES
66% - There was no change in the headcount
34% - There was a decrease in the headcount
The pandemic affected the number of CONTRACTORS
40% - There was no change in the headcount
60% - There was a decrease in the headcount
According to the survey results, contractors were more affected in headcount reductions during the pandemic
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▌worldsteel members survey 2021
Physical removal of vulnerable workers from the sites (operational and staff)
Implemented and will likely continue after the
pandemic – 53%
Implemented and will stop after the
pandemic – 36%Not implemented – 10%
Physical separation of workers who remain on site by implementing social
distancing controls
Replacement of physical meetings with video conferencing
Create technical requirements for working from home and increase the
use of this work format
Implemented and will likely continue after the
pandemic – 66%
Implemented and will stop after the
pandemic – 34%Not implemented – 0%
Implemented and will likely continue after the
pandemic – 82%
Implemented and will stop after the
pandemic – 17%Not implemented – 2%
Implemented and will likely continue after the
pandemic – 53%
Implemented and will stop after the
pandemic – 33%Not implemented – 14%
100%
15
▌worldsteel members survey 2021
Hygiene measures reinforcement Implemented and will
likely continue after the pandemic – 89%
Implemented and will stop after the
pandemic – 11%Not implemented – 0%
Establishment of a crisis committee and the inclusion of pandemic clauses
Reduced working hours or short-time work
Implemented and will likely continue after the
pandemic – 78%
Implemented and will stop after the
pandemic – 20%Not implemented – 2%
Implemented and will likely continue after the
pandemic – 3%
Implemented and will stop after the
pandemic – 47%Not implemented – 50%
100%
16
Beyond the pandemic
• Will these have a lasting impact ?
• How will megatrends be affected by the pandemic?
▌ COVID-19 impact channels – short term
Supply shock Demand shock Confidence shock Containment
measures >>factory shutdowns and shortage of labour >> supply chain disruptions
Confinement measures >> freeze in consumption activities
Unemployment >>less income
Fear and uncertainty about the virus and its impact >> financial market volatility, weak confidence
▌Pr
e-CO
VID
Meg
atre
nds
Technology• Digitisation
• Automation
International • Backlash against
globalisation
• Shifting global power, great decoupling
• Weakening of global institutions
• Rising protectionism
19
Social/Political• Political polarisation,
nationalism
• Rising inequality
• Ageing population
• Urbanisation
• Rising climate change pressure
▌Reaction to the pandemic Acceleration in ongoing megatrends
Renewed focus on resilience, health & safety, government role
Behavioural Changes
Resilience building
Domestic/Inter-national politics
• Increased tele-activities• Business: supply chain
resilience, automation
• Globalisation revisited
• New pattern of international relations
• Shift in preferences
• Environmental awareness
• Government: safety, industrial policies
• Consumer: higher savings
• State role as protector and last resort, nationalism
20
▌Pre-COVID trends in the steel industry
CO2 mitigation efforts
Slow demand growth Auto industry transformation
New concept of urban mobility
Smart manufacturing
Shift in regional growth driver, rising protectionism
Smart cities
Energy transformation
21
▌Lo
ng te
rm im
pact
on
stee
l
indu
stry
Steel using sectors’ structural changes
Policies and geopolitics
Long term economic prospects
22
The pandemic’s impact on productivity: education, health, work arrangements, wider adaptation of IT and ICT
Larger than expected economic damage from the pandemic
Rising inflationary pressure and tax burdens
Changes in social behaviour
Changes in international relations
Climate change responses
▌ Long term economic uncertainty
24
▌Im
pact
on
stee
l usi
ng
sect
ors
• Resilience building
• Industrial and trade policies
• Environmental protection
• Shift in demand for space with remote work and e-commerce
• Urban transformation
• Green recovery
• Transition to EV, automation
• Sharing economy
• New urban mobility
• Green investment
• Digitisation/automation
Global steel demand has fared better with the pandemic than with the financial crisis. Healthy rebound expected in 2021-22.
Operational side also performed well.
The pandemic will bring a far-reaching transformation of society, offering additional challenges to the steel industry; in particular, structural changes in the steel using sectors, increased environmental pressure.
Steel will be part of the solution and will also see new opportunities from new investments required for the low-carbon society.
▌Concluding remarks
25
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