Global Steel prices to remain on a downward trend: Fitch

September 19, 2022 (MLN): Steel demand in China and other countries for the years 2022-2023 will remain low due to an increase in the interest rate and the global energy crisis, according to a report published by fitch solutions

The short-term steel price forecast for the years, 2022 and 2023 is $860/tonne and $825/tonne respectively. The reason behind this decline is a contraction in Mainland China’s real estate sector, recession in Europe from the ongoing energy crisis, an increase in rate by the federal reserve, a strengthening US dollar, and exposure of emerging markets to USD-denominated debt.

China’s demand for steel raw materials is expected to decline in the future, because on September 5, 2022, 70 countries across China were once again in lockdown and consumers are not buying homes and spending is generally down, another reason is industrial interruptions from energy supply shortfalls and contracting real estate sector dragging down prices.  Consumption contribution to GDP growth in Q2 was -211% of quarterly growth.

Russian steel export volume is declined and currently, it is trading (15%-25%) down due to sanctions and reputational risk. Further, it is stated that Steel demand in China was down an average of 6%YoY (down 3.9% in August YoY), and Private house construction in the US was down 18.2% in August vs. December 2021.

In Europe and North America, steel production will remain disrupted because of high energy prices, financial issues, and plant upgrades. The reason behind the increased energy price is Gazprom’s decision to fully cut off piped natural gas supplies to Europe which will affect companies’ cost of production but the Production of construction materials across the EU has fallen but not as sharply as US and China.

Steel consumption in the EU grew by 13.3% YoY in 2021 and posted a 6.5% YoY growth in Q122, but has since contracted slightly due to high energy prices since February. It is expected that demand in 2023 will increase because Germany wants structural evolution for its economy away from export-led growth.

For the long term “We see them averaging $825/tonne next year, and $750/tonne over 2024-2026” according to a report published by fitch solution
In the report, the analyst stated that steel demand will come to normal if the Federal Reserve slows its rate hikes, which would likely weaken the US dollar, support more demands for US housing, and encourage more consumption while reducing the relative cost of Emerging markets which are US dollar-denominated debts.

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