EghtesadOnline: Global steel prices are expected to decline in the second half of the current calendar year, after an upward rally during January-June, on account of decline in demand in the world’s largest consumer, China.
However, BMI Research, a Fitch Group firm, said 2017 will usher in good news for the market with steel prices edging up higher, PTI reported.
“We expect the January-June 2016 steel rally to fade and prices to head lower in the latter half of 2016 as declining Chinese steel demand growth, stemming from a slowdown of the country’s construction activity, will result in an oversupplied market,” the firm said in its latest report.
It expects prices for the metal to trade in the range of $450-520 per ton during the second half of 2016 with the average price for the entire year coming to $480 a ton.
“Over the first half of 2016, steel prices rallied due to a combination of high demand from Chinese steel users restocking the metal, government stimulus measures implemented in the housing market and positive investor sentiment,” BMI Research said.
On the outlook for 2017, the company said: “Although we forecast the January-June 2016 steel price rally to fade over the latter half, prices will gradually edge higher from 2017 onwards, due to Chinese supply moderation.”
It added that the global steel market will see a surplus of two million tons in 2016, a decrease from a 2015 surplus of 12.2 MT, reports Financial Tribune.
From 2017 onwards, the global steel market will tighten and shift into deficit, decreasing the stocks-to-use ratio from 13.6% in 2016 to 11.6% by 2020.
“Despite this, prices will remain subdued by historical standards. For instance, our 2016-2020 average of $518 per ton is significantly lower than the annual average of $667 a ton during 2011-2015,” it added.
Flat in June
The most recent figures from the World Steel Association show that for June steel production for the 66 countries reporting to the association stands at 136 million tons, unchanged from the same time last year.
While production was flat for June, for the first six months of the year global steel production declined by 1.9% compared with the same time last year. For 2016, the six-month production total stands at 794.8 million tons, the association reports.
China, far and away the largest steel producer in the world, saw steel production for June improve by 1.7% compared with the same time last year. However, for the first six months of the year, steel production in China declined by 1.1% compared with the same time last year.