A Stable Growth Outlook for the Global Economy Bodes Well for Metals & Commodities
The steel industry is looking up amid increased global demand, and investment growth. Demand in China, which controls 50% of global steel production, and is a major steel exporter, has remained stable despite concerns of loss of steel trade arising out of US actions on steel imports under Section 232 of US Trade Expansion Act, 1962. The US imposed trade restrictions in a move to improve the capacity utilization, productivity and job creation in its manufacturing sector, which itself bodes well for the US economy. Stable growth in both China and the US is important for the global economy to stay away from wild fluctuations in commodity prices and its impact on businesses and investor sentiment.
Steel Prices on a Rise, as Steel Demand is up Globally
In the US steel prices have increased over 25% to 35% after tariffs on steel and aluminium were announced by the Trump Administration. China appears to be the biggest target, even though it accounted for 3% of U.S. steel imports last year. Amid opposition from some important trading partners, the US exempted quite a few countries, taking the exempted volume or value to around 65% based on last years data.
In China, which is another big manufacturer and consumer of steel, prices have increased by around 10% in the past one month. SHFE traded steel rebar prices were up 10% in the month of April, while prices for Hot Rolled Coils increased by ~8-9%. An important indicator of steel demand in China, SHFE traded steel rebar prices have risen by 22% after reaching a low of 3333 yuan per ton on 26th March 2018 to close at 4072 yuan per ton on 9th May 2018.
China’s iron and steel prices are rising amid falling steel inventories and growing optimism about demand from the infrastructure and housing sector. After falling in the month of March, steel prices recovered strongly in April partly driven by a sharp fall in inventories. Total steel inventories hit a four-year high of 19 million tonnes in March, but have fallen by around 30% since then. The current situation of rising steel prices and stable to lower prices for iron ore and other steel making raw materials has benefitted Chinese mills to witness better steel margins.
SHFE REBAR PRICES, CHINA (Yuan/Ton)