By Anil Mathews (ScrapMonster Author)
December 28, 2015 06:36:33 AM
The world needs to get used to cheap Chinese steel, with export prices poised to fall again next year as the biggest producer adjusts to demand that's dropping for the first time in a generation.
EconomicTimes - The world needs to get used to cheap Chinese steel, with export prices poised to fall again next year as the biggest producer adjusts to demand that's dropping for the first time in a generation. The price of hot-rolled coil, used in everything from fridges to freight containers, may decline about 13% next year, Colin Hamilton, Macquarie Group's head of commodities research, said by phone from London. The nation's steel exports, which have ballooned to more than 100 million tonne this year, may stay at those levels for the rest of the decade as infrastructure and construction demand continues to falter.
While falling steel prices are partly driven by the collapse in raw materials and lower output costs, "it's just more to do with the fact the industry was built for demand growth that hasn't come through," Hamilton said. "We're past peak steel demand. I think provided there is overcapacity in the Chinese system and given where demand is, it's going to be like this for some time."
The flood of Chinese supplies has roiled manufacturers around the world, triggering trade restrictions from India to Europe to the US. Continued low prices will pressure steel-making profits worldwide, and may trigger further measures against Chinese exports.
China's hotrolled coil is a key reference price for the global steel market.
The country is the biggest and one of the lowest-cost makers of a product used by manufacturers across the world. Banks, including JPMorgan Chase, have said China's outbound shipments will peak this year as low prices and trade tensions force Chinese producers to start paring output.
Courtesy : EconomicTimes