June Steel Price Forecast: Brexit and British Steel – What Will Happen?

June 29, 2016

The recent vote that has Britain leaving the E.U. has a global audience on the edge of their seat: What impact will it have on metal prices? The labor market? The steel industry in the UK?

Most analysts agree that Brexit is casting doubts over Tata Steel‘s plans to sell its operations in the U.K. Tata is based in Mumbai but its Port Talbot, Wales, location is one of Europe’s largest steel making operations by production capacity.

Plans to sell were announced back in April, due in part to severe funding issues and the global glut of steel combined with rising manufacturing costs, The Wall Street Journal reported.

Tata has already cut thousands of jobs due to falling demand and a rise in cheap steel imports from China. The Brexit vote has done nothing to uncomplicate matters as questions surround immigration, trade and other policy areas, according to the WSJ. Also worth noting is Tata Steel’s sale process.

“Trade negotiations with potential buyers will not be easy as business activity in the region will take a hit,” Goutam Chakraborty, an analyst at Emkay Global Financial Services in Mumbai, told the WSJ.

China Plans Cuts

Meanwhile, Stuart Burns (Editor-at-Large, MetalMiner, and a U.K. resident and citizen) wrote recently that China plans to cut 45 million metric tons of steel capacity this year alone. He added that lower coal output capacity is also expected to be cut by the Far East nation by 280 mmt.

Burns wrote: “The capacity cuts will involve relocating 700,000 workers in the coal sector, and 180,000 workers in the steel industry,” Xu Shaoshi, chairman of the National Development and Reform Commission, said at the World Economic Forum in the northern city of Tianjin. Xu said he was “very confident that China will achieve the 2016 targets.”

You can find a more in-depth steel price forecast and outlook in our brand new Monthly Metal Buying Outlook report. Check it out to receive short- and long-term buying strategies with specific price thresholds.