CRU Explains: Why Early Blast Furnace Restarts Lead to Oversupply

By CRU Analysts Alexander Ordosch and Iris Speelmanns, from CRU’s Steel Sheet Products Monitor:

The Covid-19 crisis has resulted in a rapid fall in market activity and steel demand, which has resulted in steelmakers across the globe responding quickly by lowering steel production. Steelmakers have two options to reduce steel output in response to lower demand: lower hot metal consumption and output and/or reduce scrap rates. Because many blast furnaces were already operating at low utilization and scrap rates, many steelmakers needed to idle blast furnace capacity. This has meant the volume of hot metal and steel output has not been reduced as significantly as the capacity idled. Currently, 28 blast furnaces (BFs)—totaling ~43 Mt of annualized nominal capacity—have been idled in the USA and Europe. During the recovery phase of the Covid-19 pandemic because the restart of BF capacity is lumpier than the upturn in demand, there is the potential for periods of excess supply.