Steel prices may drop everywhere, except in the US

29

Nov

Steel prices may drop everywhere, except in the US

PRAKSHI RAWAT

The magnetic metal is likely to benefit from Biden's $1 trillion building boost. Steel prices in the United States will indeed be boosted by US President Joe Biden's acceptance of such an infrastructure stimulus plan on November 27, even when they are anticipated to fall further in other places of the globe to $750 per ton for longs and flats.

In a commentary, Fitch Solutions Country Risk and Industry Research (FSCRIR) reported that the global steel pricing rise has come to a complete stop, besides the United States. Last month, the World Steel Association (world steel) estimated that if US President Donald Trump signed the $1-trillion infrastructure bill, steel prices would rise, but the effect would not have been seen until late 2022.

Price estimate is expected to go up

Fitch Solutions, on the other hand, has increased its steel pricing and estimate for this year from $920 to $950 per tonne. Steel prices have risen faster than predicted during the first half of the year given the long supply mismatch. The FSCRIR correctly anticipated that prices had fallen in the second half, with European and Asian prices dropping, however US steel prices have started to recover since October.

The US steel prices that have been setting historical records and until the time of writing, have lifted the average temperature in 2021. Ever since the beginning of each year, global steel prices have averaged $959 per tonne, opposed to a 2020 average of $582.

The American steel index closed at 1555.19, up 20.35 percent ever since the start of the year. The index has fallen 13.11 percent in the last three months. Steel prices in China are currently at 4,337 yuan ($678.81) a tonne, the lowest since February that year and about 25% lower than an all high of 5,975 yuan ($935.19) set.

China's production has grown.

China's steel production will rebound next year, as per Fitch Solutions, after dropping since July. According to world steel figures issued, China's steel output fell by 23.3 % for the fourth month in a row, the biggest drop this year. The Chinese manufacturing base has indeed been damaged by the country's energy crisis, which has been compounded by high coal prices and dry season in certain places.

Chinese steel production is anticipated to widen by 2.5 percent in the year and 5% next year, as per Fitch Solutions. As per world steel data, Chinese steel output decreased by 0.7% from January to October. The Xi Jinping administration's intervention within the coal sector, as per FSCRIR, has alleviated China's energy crisis, and steel manufacturing is anticipated to return from the severe losses until perhaps October. Prices of iron ore, a steel-making raw ingredient, jumped by much more than 5% in anticipation of a recovery in Chinese steel production. They jumped by $5 per tonnes to 96.59 (617 yuan).

Limit of production

Fitch Solutions has said that the government had indicated it will pursue a less ambitious emissions reduction agenda in answer to Beijing's environmental standards to curb steel production. Several of the tough Chinese restrictions that were introduced during the first half of the week will therefore be phased in. Government is also focusing on acetylene plants.

As per FSCRIR, new, less-polluting steel capacity could come online next year, culminating in a 5% increase in steel production in China. Steel prices in Europe and Asia have started falling, as per the rating agency, and far more decline, albeit minor, is anticipated for the rest of last year and early next year.

On the demand side, world steel does not expect any increase within the coming year, since the Chinese real estate market remains emotionally unstable from Beijing's rebalancing and protection of the environment policies. "Apparent steel use could be supported by those restocking operations. The government's recent efforts to press for a shift away from a potential estate-dependent model of development are inclined to maintain, as per the association.

Demand impact

As per Fitch Solutions, China's construction-related demand for steel peaked in the first half of last year, but existing projects and new community infrastructure projects will keep demand again for ferrous metal high for another four years.

"We don't really expect the significant demand impact that emerged from the government's acceleration of assistance since April 2020 to support the country's post-Covid recovery would resurface in 2022 and beyond," it said.

While steel production in Europe remains delayed owing to facility upgrades or financial difficulties, Covid curbs inevitably cause transportation difficulties. However, it is conceivable that distributor stocks may delay purchases, resulting in weak growth in the next months, as per the report.

Steel prices in the United States are expected to moderate next year unless supply is recovered, but a price collapse is unlikely thanks to massive demand, as per Fitch Solutions. Following the decline in 2020 due to the Covid outbreak, the rating agency anticipates a rebound in European steel demand. Similarly, the Steel Production Association expects a rebound gaining some traction in the EU, despite the rise in Covid infections.