Industry Profile — Canadian Steel Market  2010

Apparent Domestic Consumption^{Footnote 1} (ADC)

Canada:

According to industry-supplied steel trade data, Canadian producers shipped 11.8 million tonnes (mt) of steel in 2010, up 38 percent from the 8.6 mt shipped in 2009 but still 21 percent less than in 2008. Year over year imports in 2010 were up 47 percent to 8.7 mt, while exports were up 42 percent over the same period to 7.0 mt. Canadian apparent domestic steel consumption (ADC) was 13.5 mt in 2010, up 42 percent over the previous year but still 8 percent below 2008 and 13 percent below 2007. Imports accounted for 74 percent of steel consumed domestically in 2010, compared to 62 percent in 2009 and around 52 percent (plus or minus) in 2005-2008. In contrast, import penetration was only 37 percent in 2001 and 30 percent in 1995. Imports from the U.S. accounted for 47 percent of Canada’s ADC in 2010, which was similar to 2009 imports, but only 36 percent in 2008, 33 percent in 2007 and 28 percent.

The United States:

U.S. steel industry shipments roughly 76 mt in 2010, up 38  percent over 2009, but down from the 89 mt shipped in 2008 and 96 mt in 2007. Steel exports were up 29 percent year-over-year to 10.9 mt, while imports were up 48 percent to 22 mt. With the exception of 2009, when U.S. steel imports totalled 15 mt, 2010 volumes are the lowest since 1993. U.S. ADC was 86 mt in 2010, up from 61 mt is 2009 but still down considerably from the 105 mt consumed in 2008 and historical high of 131 mt recorded in 2006. Steel imports from Canada, at 6 mt, supplied 7 percent of the U.S. domestic market, up from 6.3 percent in 2009 and the most on record in percentage terms and the second-most in volume terms. Import penetration from all sources totalled 25 percent, up from 24 percent in 2009, 28 percent in 2008 and 26 percent in 2007.

Statistics Canada Data^{Footnote 2}

Canadian Steel Imports in 2010:

Statistics Canada data reported that Canada’s 2010 steel imports totaled 7.83 mt, valued at $8.23 billion. This represented a volume increase of 37  percent compared to 2009 and a 25 percent value increase. Imports from the U.S., at 5.35 mt, accounted for 68 percent of all Canadian steel import volume and 67 percent of the total value in 2010. This compared to 70 percent of the volume and 65 percent of the value in 2009, and 69 percent of the volume and 65 percent of the value in 2008. Imports of semis were up considerably in 2010 to 641,000 tonnes, compared to 207,000 tonnes in 2009 and 296,000 tonnes in 2008, but still below 2006 and 2005 levels, when imports of semis were at 889,000 tonnes and 926,000 tonnes, respectively. In 1995, Canada imported 1.5 mt of semis.

Canadian Steel Exports in 2010:

Canada exported 6.24 mt of steel in 2010, 43 percent more than in 2009, and valued at $5.62 billion. Exports to the U.S. increased 35 percent over 2009 to 5.38 mt and continued to be the most important market for Canadian steel, accounting for over 86 percent of the export volume and 88 percent of the export value in 2010. And while Canada exports to other regions of the world, amounts shipped to individual countries remained modest when compared to the total tonnage shipped to the U.S.

Balance of Steel Trade in 2010^{Footnote 3}:

Canada posted a trade volume deficit of 1.6 mt and a value deficit of $2.6 billion in 2010. In 2009, Canada ran both volume and value deficits of 1.3 mt/$2.4 billion respectively in 2009, but a volume surplus of 82,000 tonnes and a value deficit of $2.1 billion in 2008. Over the last several years, Canadian steel trade balance have fluctuated, recording both volume and value surpluses, deficits or combinations of the two depending on the time period being examined.

Canadian Imports of Five Monitored Products: Jan - Dec 2010^{Footnote 4}:

Hot Rolled Carbon & High-Strength Low-Alloy (HSLA) Plate:

Approximately 98 percent of all hot rolled sheet and HSLA imports originated from seven countries: the U.S., Germany, Japan, South Korea, Australia, China and Brazil, with U.S. imports accounting for roughly 83 percent of imports. The average import price in 2010 from all sources was $794 per tonne and $801 per tonne from the U.S. These values remain down from the record values recorded in 2008 from when imports from all sources were valued at $1,201 per tonne and those from the U.S. were $1,196 per tonne, and all were lower than those recorded in 2009. Imports of plate totaled 489,000 tonnes in 2010 and, with the exception on 2009, this was the lowest amount imported since 2003.

Hot Rolled Sheet:

Nearly 94 percent of hot rolled sheet imports originated from the U.S, with an additional 2.4 percent re-imported from Canada in 2010. Imports from other countries individually were essentially negligible. The average import price in 2010 from all sources and the U.S. $742 per tonne, up from $689 per tonne in 2009 but down from $1000 per tonne in 2008. Import volumes totaled 1.5 mt in 2010, the most since 2006 when they exceeded 2 mt.

Cold Rolled Sheet:

U.S. imports of cold rolled sheet accounted for over 90 percent of the total volume, with another combined 7 percent imported from Belgium, Spain and Sweden. The average import price in 2010 from all sources was $932 per tonne, and $926 per tonne from U.S. sources. This is down from both 2009 and 2008 figures, when average prices from all sources were around $1,000 per tonne. Import volumes in 2010 were 439,000 tonnes, the most since 2006 when they were at 619,000 tonnes.

Galvanized Sheet:

Imports from the U.S, Taiwan, China and India accounted for nearly 99 percent of all galvanized sheet import volumes in 2010, with 94 percent originating from the U.S. alone. The average import price in 2010 from all sources was $973, while imports from the U.S. averaged at $975 per tonne. In 2009 and 2008 prices averaged in the $1,020-$1,040 range. The total import volume was 957,000 tonnes in 2010, the most on record and nearly 20 percent more than the previous record of 800,000 tonnes in 2006.

Rebar:

Nearly all Canadian rebar imports (99.3 percent) originated from four countries: the U.S. (76.9 percent), Spain (5.9 percent), South Korea (4.3 percent) and Turkey (12.3 percent). The average import price from all sources was $644 per tonne and $676 from U.S. sources alone. These prices were up from 2009, when average import values were $601 and $618, respectively. However, they remained considerably below the record highs of $937 and $895, respectively, recorded in 2008. Total import volumes were 520,000 tonnes in 2010, compared to 332,000 tonnes in 2009 and 449,000 tonnes in 2008, and were at their highest level since 2007.

Canadian Steel Import Permit Data Trends^{Footnote 5}:

Below are brief summaries of Canadian steel import permit data activity for the five products above, for the last three months of 2010. Information was obtained through the Foreign Affairs and International Trade Canada website. More detailed information on steel import permit trends, including breakdowns by product and by source country, can be viewed and downloaded from this site.

Discrete Plate:

Average monthly imports of hot rolled sheet totaled 34,000 tonnes, of which an average of 27,000 tonnes per month came from the U.S. The average monthly price over the period was $848 from all sources, $871 from the U.S. and $748 from non-U.S. sources.

Hot Rolled Sheet:

Average monthly import of hot rolled sheet totalled 82,000 tonnes, of which an average of 79,000 tonnes per month came from the U.S. The average monthly price per tonne over the period was $753 from all sources, $745 from the U.S. and $985 from non-U.S. sources.

Cold Rolled Sheet:

Average monthly imports of cold rolled sheet totaled 38,000 tonnes, of which an average of 31,000 tonnes per month originated from the U.S. The average monthly price per tonne over the period was $1,220 from all sources, $1,092 from the U.S. and $1,840 from non-U.S. sources.

Galvanized Sheet:

Rebar:

Average monthly imports for rebar averaged 48,000 tonnes per month, of which 37,000 tonnes came from the U.S. The average monthly price per tonne over the period was $667 from all sources, $695 from the U.S. and $573 from non-U.S. sources.

Review of the Canadian Steel Industry in 2010^{Footnote 6}:

The industry reported a year-over-year Canadian steel mill shipments increase of 38 percent to11.8 mt. This was encouraging considering the most severe global economic crisis in recent memory. In addition, apparent domestic steel consumption (ADC) increased 42 percent in 2010 to 13.5 mt. To give some perspective, Canadian steel shipments in 2009 totalled only 8.6 mt, which was the lowest amount produced since the mid 1960’s. And while 2010 production levels were higher than that, it was still the least tonnage since 1992. Therefore it will take several years before Canadian production resumes to pre-crisis levels, and perhaps not at all if there are permanent structural shifts that have taken hold as a result of global and North American production shifts. With the exception of 2009, Canadian ADC in 2010 was also at its lowest since 1996 when it was 12.9 mt. It is also noted that import penetration into the Canadian market continued to increase during the recessionary period and is now approaching 65 percent, and predominantly from the U.S., Canada’s most important trading partner. This elevated level of imports could be attributed to several factors, including rationalized production levels during the recession, temporary mill closures by U.S. Steel Canada (one of Canada’s largest steelmakers) in 2008, 2009 and 2010, the high value of the Canadian dollar, rising commodities prices that are squeezing domestic margins and highly integrated nature of the Canada-U.S. steel market.

Statistics Canada^{Footnote 7} reported that steel mill shipments to service centres totalled 3.3 mt in 2010, up from 2.3 in 2009 and only marginally below the 3.4 mt shipped in 2008. Deliveries to the motor vehicle and parts industry totalled 858,000 tonnes in 2010, up from 616,000 tonnes in 2009 but down from the 1.27 mt shipped in 2008, 1.8 mt in 2007 and 2.26 mt in 2006. Deliveries to the pipe and tube sector – at 1.32 mt in 2010, were up from the 828,000 tonnes shipped in 2009 but down from the 1.99 mt shipped in 2008 and 2.04 mt in 2007.

According to the Metals Service Center Institute^{Footnote 8} (MSCI), Canadian service centers shipped 5.14 mt of steel products in 2010, up 15.3 percent year over year but down from the 6.08 mt shipped in 2008. Canadian steel inventories at the end of December 2010 were 1.27million tons, or 34 percent above levels a year earlier and equal to a 3.7-month supply at current shipping volume.

The World Steel Association^{Footnote 9} (Worldsteel) reported that global crude steel production totalled 1.413 billion tonnes in 2010, up from the 1.20 billion tonnes produced in 2009 and the 1.329 billion tonnes in 2008. In 2010, China produced 627 mt, or 45 percent of the world total and 9 percent more than in 2009. While Canadian steel imports from China were down considerably in 2010, producers in Canada and the NAFTA zone more generally remain very concerned about China’s ability to curb production and levels of exports.

The Iron and Steel Statistics Bureau9^{Footnote 10} (ISSB) similarly reported that China remained the world’s top steel producer in 2010, and that Asia now accounted for 64 percent percent of all global production. China actually dropped to the number-two global steel exporter in 2010 – at 42 mt – behind Japan’s 43 mt. The ISSB correctly points out that Chinese steel exports have dominated headlines in recent years, not just because of the total tonnages being exported, but also due to their volatility. With Chinese production levels so high even small changes in the proportion going to the domestic market can create export surges with serious implications for markets elsewhere. The OECD^{Footnote 11} reported in December 2010 that China had reached 725 million tonnes of crude steelmaking capacity in 2010, a figure that is forecasted to increase to 815 million tonnes by 2012.

Following the release of China’s 12th Five Year Plan (2011-2015) on March 15, 2011, industry observers are anxiously awaiting publication of the steel component of the Plan, officially titled the Planning of the Outlay and Adjustment of Steel Industrial Productivity, and which is one of eighteen such components that will be announced for various sectors. On March 23, 2011, China's Ministry of Industry and Information Technology (MIIT) announced that, during the next Five-Year Plan, China’s domestic steel industry would adhere to the following general guidelines:

1. steel produced from domestically-supplied resources are to be supplied mainly to China's mid-west region, while
2. steel produced from imported resources should be used mainly in the country's coastal regions. In addition, steel mills are to be gradually removed from cities.

Attention continues to focus on Japan, where steel production and other types of manufacturing continues to recover following the March 11, 2011, earthquake and the devastating tsunami that affected many coastal areas of northeastern Japan. Power shortages have been reported in some areas but at least one steel producer, Nippon Steel, is supplying electricity through the co-generation facility it operates with the Tokyo Electric Power Company (TEPCO). Some reports have stated that as much as 10 percent of Japan’s power-generating capabilities may have been affected. As recovery and reconstruction efforts continue, several steelmakers have reported disruptions to their operations due to rolling power outages. And while domestic demand for steel is expected to stabilize, it is currently unknown how the interrupted supplies of steel and other value-added components will global value chains in sectors like automotive and electronics. Japanese steelmakers and other manufacturers are reportedly shifting production to sister facilities in Japan and abroad in order to maintain deliveries to its customers. However, it is too soon to tell whether Japanese steel producers will suffer any long-term effects in terms of production, market share and exports. As previously noted, Japan was to top global steel exporter in 2010.