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Home > MEPS Steel News - 31.10.2016


According to MEPS, the future prospects for the world steel industry are likely to be heavily dependent on the outcome of measures to address global overcapacity. China’s steel sector is responsible for over half of the world’s crude steel production. The authorities have pledged to reduce steelmaking capacity by between 100 and 150 million tonnes by 2020. However, year-on-year, steel output in the first nine months of 2016 is up 0.4 percent – with the figure for September rising by 3.9 percent.

Comments made by Chinese government officials at the recent EU-China trade summit suggest that the country is on target to eliminate 50 million tonnes of steel capacity, this year. From MEPS research, in October, a number of Chinese market participants remarked that continued talk over capacity cuts is giving an artificial view of supply tightness within the country. However, many buyers noted that domestic demand, in China, fell short of expectations during ‘Golden September and Silver October’.

In the first eight months of the year, Chinese exports increased by 5 percent, year-on-year. That statistic would indicate that China continues to have a major impact on its Far East neighbours and, indirectly, on the North American and European steel markets.

It is widely acknowledged that the recent global steel price recovery in the first half of 2016 is not likely to continue. Steel market values, particularly in North America, continued to be on a downward spiral, in October. One US buyer remarked that domestic steel prices could fall as quickly as they rose, earlier in the year. The introduction of trade barriers, by the US Department of Commerce and the European Commission, on a number of flat products, is likely to provide only short-term protection for regional steel manufacturers.

However, despite the downward trajectory of world steel prices over the last few months, global steelmakers are likely to retain a proportion of the price hikes that they successfully secured in the first half of the year. Furthermore, in Europe and North America, a number of local steel manufacturers announced price hikes for the fourth trimester. We believe that the increases will not be sustained as demand fundamentals remain weak. However, at worst, it could prevent a further weakening of prices, in the short term.

MEPS has long stated that global overcapacity is the biggest threat to world steel prices. Transaction values will continue to be under negative pressure until a clear and consistent message about the removal of crude steel production from the global market place is given.




Source: MEPS International Steel Review - October 2016 Issue

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