Steel Outlook
Published on - July 2024
Summary of Steel Outlook Report – July 2024
China’s Steel Demand
China’s steel demand continues to be soft due to ongoing struggles in the property sector, which is crucial for 40% of domestic steel consumption. Real estate prices have declined for ten consecutive months up to May 2024, resulting in a 4% drop in new home prices and a 34% decrease in annual sales. This subdued domestic demand has led to a continuous decline in HRC steel prices in Q1-2024. Furthermore, steel rebar futures fell to under CNY 3,400 per ton in June, the lowest in over two months.
US Steel Demand
US steel prices are expected to rise owing to healthy construction demand and fiscal spending. In June, steel prices averaged USD 730/mt, reflecting a 7.4% decrease from May’s average of USD 788/mt. The Inflation Reduction Act has significantly boosted demand for American-made steel, particularly for clean energy projects, by offering $370 billion in tax incentives to US companies. Additionally, the temporary suspension of tariffs on Ukrainian steel has been extended for another year.
European Steel Demand
European steel demand remains weak, largely due to high interest rates and reduced construction activity. In 2023, domestic steel consumption fell by 6.3% to 129 million tons but is projected to rise by 3.2% in 2024. In June 2024, steel prices averaged USD 576/ton, a 1.3% decrease from May’s average of USD 583/ton. The Turkish scrap market also saw a decline amid weaker domestic rebar demand.
India’s Steel Market
India’s domestic steel demand is strong, driven by increased infrastructure spending. The Interim Budget for FY 2024-25 raised infrastructure spending by 11% to 11 lakh crores, which will significantly boost domestic steel demand. Finished steel imports surged by 38% year-over-year to 8.3 million tons, while consumption increased by 10.5% to 23 million tons in April-May. Domestic steel demand is projected to grow by 8% in FY 2024-25 to 130 million tons, supported by major capacity expansions by leading producers like JSW Steel and Tata Steel.
Overall Global Steel Demand remains subdued
Global steel demand is projected to grow modestly by 1.7% in 2024, rising to 1.79 billion tons from 1.76 billion tons in 2023. China’s demand is expected to decrease by 1.7% to 497 million tons in 2024. India’s domestic consumption is forecasted to grow by 13.6% in FY 24-25, reaching 136 million tons. The US steel demand is anticipated to remain stable at 100 million tons in 2024, while European steel consumption is expected to increase at a slower rate, with a projected growth of 3.2%.
Steel Production
Global steel production saw a moderate increase of 1.5% in May 2024. China’s production rose by 8.1% in May 2024 compared to the previous month, reaching 92.86 million tons, and increased by 2.7% year-over-year. India’s steel output grew by 3% to 12.2 million tons in May 2024, driven by strong domestic demand. The European Union’s steel output also rose by 10.3% in May 2024.
Import-Export Dynamics – Expect increased trade restrictions
Changes in steel import-export dynamics were observed in key nations. China’s steel exports increased by 27% year-over-year to 35.02 million tons, while imports decreased by 3.7% to 2.4 million tons. India became a net importer of steel, with imports up by 38.1% to 8.3 million tons and exports rising by 11.5% to 7.5 million tons. In the US, steel imports fell by 8.7% to 28.16 million tons in 2023, although there was an 11.3% increase in imports in April 2024 compared to March. The European Union increased steel imports by 4% in January-February 2024.
Iron Ore and Coal Markets
Iron ore and coal prices have continued to face pressure. Iron ore prices have dropped by 31% since the beginning of 2024, with global pig iron production increasing by 8.2% month-over-month in May 2024. Australian iron ore production is expected to grow by 3.1% in 2024, while Brazil’s Vale SA plans to accelerate production to meet an annual target of 320-325 million tons. Coal prices have also declined due to lack of demand and improved supply, with a projected 28% decline in 2024.
Steel Outlook and Hedging Strategies
Global fiscal policy is expected to continue supporting steel demand, with dovish monetary policies likely to revive demand. Raw material supply remains ample, keeping prices subdued. While the Chinese property sector remains critical, its recovery is expected to take time. Near-term stability in steel prices is anticipated, with medium to long-term increases once China’s demand revives. Hedging strategies suggest buyers should hedge for the medium to long term and at price dips.
This summary captures key insights and projections from the “Steel Outlook Report”, highlighting demand trends, production forecasts, economic influences, price movements, market strategies, arbitrage opportunities, and regulatory considerations.
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