During the recent Alacero Congress 59 in Cartagena, Colombia attended by SteelOrbis, several economists provided strong analysis on China and its likely effect on steel prices over the next 2-3 years.
Matt Ferchen, Fellow at Carnegie Tsighua Center for Global Policy, covered the many complex issues between Latin America and China along with the present US-China trade war. In his estimate, China will continue to play a strong role in the global economy and a risk factor for countries such as Latin America to incorporate into their strategic planning as China’s steel overcapacity will continue to be present. Ted Piccone of the Brookings Institute reinforced the conclusion that China’s economy will continue to greatly influence the global economy and steel prices.
Chief International Economist, Elisabeth Waelbroeck-Rocha from IHS Markit, noted the risk from emerging markets’ debt, the spillover effects from US protectionism, and the oil price boom and bust as important external risks to the global economy. Waelbroeck-Rocha noted that emerging market currencies have already depreciated substantially, triggering fears around debt sustainability and mounting inflation. While interest rates are lagging an increase by central banks, to avoid triggering a fall in domestic investment and spending, some countries are beginning to increase interest rates. On a positive move, Waelbroeck-Rocha noted that high global oil prices are expected to be restrained by rising US supply. She also noted that four protectionism scenarios studied by HIS Markit showed a slightly weaker world GDP growth from 3.3 percent in 2017 to 3 percent in 2020.
Various economists throughout the conference including Waelbroeck-Rocha verbalized an expectation of relative stability through 2019 but conceded that various factors could begin trending the global economy downward sometime in 2020. In regard to China’s continued steel capacity, Alex Griffiths, a Principal Analyst at Wood Mckenzie, noted that Chinese steel consumption is expected to decrease by 2021 while steel production increases with “blast furnaces getting bigger through planned consolidation along with the building of new EAFs.” He also noted that additional steel capacity that is coming online from India and even the US, with recent announcements by various companies that could add 10-11 million mt, point towards lower price dynamics.