Singapore, May 24 (ANI): Fitch Solutions has revised up its global steel price short-term forecast to an average of USD 800 per tonne compared with USD 660 per tonne previously as the persisting mismatch between supply and demand continues to edge prices higher.
Steel prices have seen a significant boost since Q4 2020 with prices around the highs last seen in mid-2008. Steel prices have thus far averaged USD 883 per tonne while the 2020 average was USD 582 per tonne.
“While we expect this rally to start stabilising as the second half of the year approaches, we do not anticipate a significant reduction in price levels or a collapse. This is due to buoyant demand despite steady production levels,” said Fitch.
Nevertheless, it expects the resistance to pay such high prices from downstream players (construction companies, electronics and equipment manufacturers) to amplify over coming quarters and a general slowdown in Chinese consumption as construction activity usually peaks in the summer months of each year.
Apart from the United States and China, Fitch also expects a revival of European steel demand following the collapse seen in 2020 due to Covid-19.
As European steel is mainly low-carbon steel produced at electric arc furnaces using scrap metal compared to Chinese steel that is mainly produced at blast furnaces requiring coking coal and iron ore, Fitch expects more downstream players (especially large automakers and electronic appliance producers) to prefer European steel going forward in order to lower their scope 3 emissions.
“We also expect more localisation of supply chains in the coming years, leading to Western downstream industries consuming greater amounts of European steel compared to Chinese exports.”
Fitch said global steel prices can ease from current levels in the longer term. Demand will stabilise following a sharp recovery in 2021 at a time when production is likely to remain elevated, which will push prices significantly lower in 2022.
“We see them averaging USD 600 per tonne next year and USD 535 per tonne 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 medium term.”
Fitch said Chinese domestic demand for steel will slow overall in 2022 and beyond as balancing of the economy away from heavy industry and towards service sector resumes, which will drag down domestic steel prices in China and the global average. (ANI)
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