Onome Amuge
Global steel price is expected to sell for an average of $800 per tonne in the first half of 2021 compared with $660 per tonne recorded in 2020 as the soaring demand and tightness in supply output continues to edge prices higher, Fitch Solutions said in its recent short-term forecast.
According to the leading global markets research organisation, steel prices have seen a significant boost since Q4 2020 with prices around the highs last seen in mid-2008. As a result, steel prices have thus far averaged $883 per tonne compared to $582 per tonne registered in 2020.
“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,” Fitch noted.
The organisation 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.
Asides the United States and China, the world’s largest economies, Fitch also expects a revival of European steel demand following the collapse seen in 2020 due to Covid-19 pandemic.
Fitch also expects more localisation of supply chains in the coming years, leading to Western downstream industries consuming greater amounts of European steel compared to Chinese exports.
In the long run, 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.
Fitch predicted that global steel prices could likely ease from current levels in the longer term. It further averred that 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 will loosen the market and drag prices lower in the medium term,” it added.
