Unexpected by most experts, steel prices have increased since the beginning of 2007. Fears that exports from China would lead to a price dip in international markets did not come true in the first months of the year. To avoid such a development for the future, China has introduced several measures making steel exports less attractive for national producers. If these measures prove successful, the impacts this will have on the global steel industry will be seen during the next few months.
In the latest edition of Consline Steel Trends we continue to analyze current market developments and give a forecast on prices until the fourth quarter of 2007.
Steel prices have soared since the beginning of the year
Instead of falling prices predicted by most experts, steel prices rose to new highs.
- The price rebound was stronger than anybody expected as prices soared well past the summer peak
- The world economy is booming and demand for steel is high except in the US
- China cut or abolished steel tax rebates on a series of grades on 15th April: further measures were introduced in May, e.g. steel makers now need licenses for the export of several steel grades
- The fear that it might come to increased output and exports from China, leading to sinking prices in the second half of 2007, was still present, although this is debatable as several analysts and steelmakers forecast further price increases
- India is emerging as a steel producing force to be reckoned with
- Most additional steel demand is coming from emerging and especially Asian markets
- Differing views on the development of commodity prices
- Despite the approaching typical third quarter, seasonal lull prices are not really expected to weaken
The world's largest steelmaking nations all raised production with the US and Canada as the only exceptions
- ISSB sees global steel output climbing to 1.24 bln metric tons this year, with consolidation making 15 companies responsible for 35% of total production; MEPS even predicts output of 1.3 bln tons, a rise of 5.5%
- EU nations are forecast to raise production moderately as most of the additional steel output will come from China and India, with significant contributions made by CIS and Brazil
- Output in the US and Canada is to decline further
- Posco predicts global steel demand to increase by around 5.9% this year, in line with similar forecasts by analysts and trade associations
- Demand will be driven by emerging markets especially in Asia
- EU countries are experiencing robust demand thanks to the general economic upswing
- China's steel demand will be determined by the effectiveness of government efforts to cool down the economy
Despite countermeasures, China was showing all signs of continued export growth
- Chinese finished steel exports hit an all-time record of 7.16 million tons in April, up by 165% year on year, replacing the previous record of 5.55 mln tons set in December 2006.
- The quality of exported steel products is rising: China may soon become a net exporter of stainless steel
- Domestic steel consumption is much lower than steel output growth in China at present: high prices and global steel demand are likely to have Chinese steel exports linger at high levels despite government efforts to curb them
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