US-based rating agency Fitch Solutions has announced that it has revised its short-term global steel price forecast to $800/mt for the first half of this year, compared to $660/mt in its previous forecast, due to the imbalance between supply and demand.
According to Fitch, steel prices have increased significantly since the fourth quarter last year and are at an average of $883/mt now. The agency expects this uptrend to start stabilizing as the second half of the year approaches, but does not anticipate a significant reduction in price levels, due to higher demand despite steady production levels.
Fitch also expects European steel demand to recover. “We also expect more localization of supply chains in the coming years, leading to Western downstream industries consuming greater amounts of European steel compared to Chinese exports,” Fitch stated, adding that it expects more downstream industries to prefer European steel to reduce their carbon emissions.
As for the longer term, Fitch stated that demand will stabilize after a recovery in 2021 at a time production remains elevated, which will push global steel prices significantly lower in 2022. Fitch sees prices averaging $600/mt next year and $535/mt over 2023-2025. “Ultimately, we expect that a combination of slowing Chinese steel consumption growth and rising global steel market protectionism prompting greater production in affected countries to loosen the market and drag prices lower in the medium term,” Fitch said. Fitch also noted that China’s local steel demand will slow down in 2022 with the balancing of the economy, and so local steel prices in China will fall, lowering average global steel prices.
Fitch Solutions had previously stated that the recent rise in global steel prices would be short-lived, and that prices would decline towards the end of the first quarter this year as steel production continued to be restarted, as SteelOrbis reported.