Over the last month, steel prices have seen dramatic growth after falling to multiyear lows. The metal has experienced a huge fall in prices with the growth in exports from China and other Asian countries. However, prospects of steel businesses are likely to illustrate a steady improvement after the first half of this year.
According to the World Steel Association, crude steel production declined 7.1% in January of this year to 128 million tonnes, relative with the same period of last year. In addition to the latest fall, steel production declined 2.8% in the last year over 2014. With the decline in production from top producers, steel capacity utilization is also falling. Above all, China has been making significant cut in its production of 7.8% year-on-year.
Some analysts are still expecting depressed steel prices for this year, and consider the latest rally as a selling opportunity. I have a different outlook. I’m expecting a steady growth in steel prices over the coming months. Several steel companies have posted major losses over the past year, which forced them to cut their production.
Higher import duties from the European Union and the United States have forced the Chinese steel industry to scale back its production. In addition, signs of high demand are coming from the growth in oil prices, as the energy sector is a big consumer of steel products. Sentiments for business environment are also improving as S&P 500 and the Dow Jones posted sharp growth last week. On the whole, steel prices are likely to rise in 2016, but we can expect complete stabilization in 2017.
economic calender.com