Interview: Amine Louali
To what extent can Morocco learn from different aspects of the Turkish steel industry model?
AMINE LOUALI: The Moroccan steel industry is affected by macroeconomic and geopolitical developments. If there is a devaluation of the lira in Egypt, for example, the domestic industry is directly impacted. All players in the steel market can be either classified as fully integrated, half-integrated or non-integrated: Players that are fully integrated, such as Russia or Brazil, hold the raw materials and energy required to produce high volumes of steel at comparatively low costs. China is a prime example of a half-integrated player, as it lacks iron ore but is abundant in coal. Lastly, non-integrated players have neither the raw materials nor the energy to produce steel.
Turkey and Morocco are both the latter. Turkey, however, emerged as the world’s eighth-largest steel producer. In the early 2000s Turkey strove to become one of the biggest steel producers and, being reliant on iron ore, began developing the sourcing of scrap. Having become the world’s largest scrap importer, Turkey developed an entire industry around vessels and dismantling of ships, and established a complete ecosystem with dedicated ports to maximise the unloading of materials at lower costs. Morocco could follow this model. Under the Industrial Acceleration Plan, the kingdom signed a contract to develop scrap and is further trying to benefit from Law No. 03-09, which could result in a 15% margin of difference for renewables. Moreover, Maghreb Steel is the only steel producer in Morocco and has increased its domestic market share by 45% since 2015.
How would you describe the impact of Chinese steel dumping on the Moroccan steel market?
LOUALI: After the 2008 crisis all major steel-producing countries followed a similar pattern: first supplying their local markets and then proceeding, in view of an abundant global supply of steel and reduction in demand, to further push their volumes and dump steel. In order to protect the sector a range of safeguard duties and anti-dumping measures have been implemented until the end of 2018 or mid-2019. Since 2014, in particular, such protectionist measures increased two-fold, and some voices in Morocco said that an uncompetitive sector was being subsidised. However, this is not the case, as steel and cement constitute the key components to build an economy. Second only to water, cement is in fact the most consumed product, and demand for cement and steel follows population growth.
Take China as an example; the country has seen a boom in population growth and, from 2000 to 2010, in steel. China now produces and consumes 50% of global steel capacities and thus has a huge impact on the world’s steel industry. In 2017 China did put a temporary halt on its steel exports and induction plants were cut. China was also facing immense environmental pressure, resulting in it having to remove all its illegal production facilities between November 2017 and March 2018. Of course, this affected Morocco and the entire world, as costs for graphite electrodes went up from $3000 per tonne to $30,000 per tonne due to Chinese cuts. In this sector it is said that “if China catches a cold, Morocco sneezes”.
These developments can generally be described in two waves. First, whenever China expands its volumes, Russia and Turkey orient their exports towards the West, which makes Moroccan steel producers suffer. When China is contracting volume, however, there is a tendency for Russia and Turkey to instead serve their local markets, and Moroccan producers become generally profitable. However, as China has been exporting extremely limited quantities of steel since 2017, global overcapacities might be resolved over the coming months and non-integrated players will get a new lease of life. This trend also resulted in an increase in the price of steel since mid-2016.
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