China’s Influence on the Global Steel Sector
The actions taken in China continue to influence the global
steel market. Following capacity cuts earlier in the year, the Chinese
authorities recently announced the latest round of production restrictions, from
mid-November to mid-March, in an attempt to reduce pollution during the winter.
The expectation of a further tightening of supply has given Chinese prices, in
particular long products, a boost, after a degree of pricing stability, in the
early part of the fourth trimester.
Following the closure of hundreds of scrap-based induction furnaces, Chinese
steel selling figures have been on an upward trajectory for the majority of
2017. This led to Chinese steel manufacturers prioritising sales to the domestic
market and a reduction in export volumes.
In recent years, North American and European producers introduced a number of
trade petitions, in particular on flat products, to limit the direct impact of
Chinese imports. Several European steel market participants remarked that a
shortage of competitively priced material from third country sources has given
regional mills the opportunity to maintain steel values, at a relatively high
level. This developed in the absence of low-cost alternatives.
MEPS believes that surging Chinese values should enable producers in Japan,
South Korea and Taiwan, as well as many other parts of the world, to lift their
selling figures, in the first quarter of 2018. However, we expect that global
transaction values, in this period, are likely to represent the peak of the
current cycle – with prices projected to decline during the rest of the year.
MEPS - International
Steel Review - December 2017 Edition
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