Steel prices have been declining since the beginning of the year across all markets and will likely be under pressure given the weak Chinese demand, analysts have said.

Currently, steel prices have dropped to a two-month low with October steel hot-rolled coil (HRC) futures ruling at $519.50 a tonne free-on-board on the Shanghai Futures Exchange (ShFE). September steel rebar futures on ShFe ended at $501.24 a tonne. 

Price forecast lowered

“We have revised our 2024 global average steel price forecast downward to $700/tonne from $740/tonne previously, with Chinese demand weakness having the potential to place a cap on prices,” said research agency BMI, a unit of Fitch Solutions.  

It said the global average for longs and flats has averaged $673/tonne in the year-to-date as of May 2024, while the current average stands at $650.   

The World Bank, in its Commodity Outlook, said steel prices were forecast to decline by 9 per cent in 2024 (year-on-year), and a further 5 per cent in 2025.

The Trading Economics website said per private data home sales from China’s 100 largest real estate companies plunged 34 per cent annually in May after a 45 per cent fall in April. This underscored the weakness of the Chinese property market. 

Demand to remain subdued

“The excessive inventory in Chinese housing drove the market to show scepticism over the impact of the government’s house-buying programme, as the 300 billion Chinese yuan allocated for home buying by the People Bank of China is a small fraction of inventory estimated to balance out oversupply,” it said.

The World Bank said steel demand will likely remain subdued in 2024, given the continuing weakness in residential construction activity in China following a 20 per cent (year-on-year) decline in new home starts in 2023. 

“In addition, given expectations of only gradual monetary easing in advanced economies, elevated real interest rates are set to continue curbing the growth of industrial activity this year,” it said. 

However, the Australian Office of the Chief Economist (AOCE) was a little optimistic about steel’s prospects. “An expected stabilisation and then gradual pick-up in global industrial output, combined with further stimulus-related infrastructure projects, should see annual growth of nearly 2 per cent in steel production in 2024 and 2025,” it said.  

Output recovery

BMI said on the supply side, it forecasts a modest 1.2 per cent year-on-year increase in steel production in 2024 against the backdrop of a slowing global economy. “We also note that downside risks persist as the deteriorated global industrial and economic outlook will weigh on steel production,” it said.

The AOCE said world steel production is projected to reach 2.1 billion tonnes by the end of its outlook period to 2029. “Growth will be supported by new capacity — either underway or planned — with projects in the pipeline in Asia, North America, Europe and the Middle East,” it said.

However, the World Bank said though steel output is expected to recover in 2025, the anticipated increase in iron ore production in Australia and Brazil, along with new projects elsewhere, is likely to put further downward pressure on prices.  

BMI said as regards demand, the global economic outlook remained subdued, with the manufacturing sector continuing to hinder growth in major markets.  

The Australian Office of the Chief Economist said global steel consumption is forecast to grow 1.4 per cent year-on-year in 2024. “The weakness in China’s property sector over the past couple of years is expected to persist this year,” it said. 

The Indian story

The research agency said further possible stimulus announcements from China and government measures to control steel output might provide some resilience to prices towards the end of 2024.

 “That said, India’s continued demand strength is expected to drive global steel consumption in 2024,” it said. The AOCE was also upbeat on India driving demand. “India’s economic outlook remains healthy, with the steel demand expected to maintain its high growth momentum — driven by the manufacturing and construction sectors,” it said. 

The Indian Government data from late 2023 indicate a pipeline of over 1,700 projects in road transport, railways, energy and water, with an anticipated completion cost of around $360 billion, the AOCE said. 

“India is projected to record some of the strongest growth in steel output globally over the outlook period. Substantial steel production capacity is expected to be added over the next few years, with the Government aiming to double steel capacity to 300 Mt by 2030,” said the Australian Office of the Chief Economist.