Home / News / Ferrous metallurgy / Recovery in China could be key to rising global steel prices - MEPS

Recovery in China could be key to rising global steel prices - MEPS

Ferrous metallurgy / Analytics
13 562

In June, the trajectory of the decline in world steel prices continued, both for flat and long products. Most steel producers around the world will enter the traditional summer period - the seasonally slow season - with a sense of dismay that the bottom of the current price cycle has not yet been reached.

Recovery in China could be key to rising global steel prices - MEPS

The influence of China, which accounts for about half of the world's steel production, cannot be underestimated. Local steel prices are currently the lowest in the world. It was sincerely hoped that the easing of lockdowns due to Covid-19 in major cities such as Shanghai would lead to increased demand for steel. However, this has not yet happened.

The MEPS agency reported that steel prices in China in June fell by an average of two to four percent on a monthly basis. The cost of rebar, a key indicator in the long products market, fell below 4,000 yuan per ton for the first time since February 2021.

China's zero-tolerance approach to Covid-19 infections is weighing heavily on market confidence. Steel consumption is declining at the earliest in areas where new cases of the virus are being reported.

Another signal of weakness in domestic demand is the export strategies of Chinese steelmakers. Suppliers, who can benefit from their greater access to cheap raw materials of Russian origin, are now looking to sell extensively overseas. MEPS notes that many manufacturers are aggressively selling their products to key export markets such as Southeast Asia and South Korea.

Incentive measures

The Chinese authorities are taking a number of measures in an attempt to stimulate domestic demand. Unlike the policy of the rest of the world, China cut interest rates earlier this year to stimulate activity. Local government schemes offering incentives to replace existing cars or appliances will also help increase steel consumption.

MEPS warns that there are tentative signs that China is targeting production cuts in the second half of 2022. Many provincial authorities have already publicly announced their intention to limit steel production to ensure that this year's tonnage does not exceed the volumes recorded in 2021. The implementation of such measures should increase the internal price ambitions of factories, while limiting their ability to negatively influence neighboring markets through cheap exports.

The recent introduction of an export duty in India may also deprive the country's traditional steel exporters of the opportunity to offer material as competitively as before.

Consequently, European and North American producers may be encouraged by any increase in the price of imported goods from traditional low-cost sources. This may provide them with a timely and much-needed price increase as they return from vacations in July and August.

Add a comment
Сomments (0)
To comment
Войти с ВК Войти с ФБ Войти с Яндекс
Sign in with:
Войти с ВК Войти с ФБ Войти с Яндекс