While scrap prices may go down because of non-usage of scrap, but please note that it’s not feasible for blast furnaces to run a very high percentage of scrap as input. Hence, scrap prices will fall but they won’t lead to a significant fall in iron ore prices.

Europe has approximately 291mt steel-making capacity against its overall production of ~160 mt. The blast furnace capacity in Europe is ~135mt and the EAF capacity is ~156mt. EAF capacity utilization is limited to 43%, but blast furnaces are operating at 67% of their capacity. So, blast furnace utilization can increase by 17-18% easily, which can lead to a cut in EAF steel production by ~18mt. This also means that scrap surplus will be more than 18-20mt and hard coking coal demand in the global arena will rise by ~11mt.

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The opinions expressed are based on information which are believed to be accurate and complete and obtained through reliable public or other non-confidential sources at the time made. (Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations. In reviewing this report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.

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The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of IRSPL. Information barriers and other arrangements have been established, as required, to prevent any conflicts of interests.

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