The first 4 months of 2016 have seen an upturn in the cost of steel – a price increase of 20% from $305 per ton to $365 per ton*.
Due to a global over-supply, mainly originating from China the last few years have seen the prices of steel drop but as domestic demand has declined during the Chinese economic slowdown, increases in the price of steel have begun.
The last few years have seen China dominating and influencing steel prices. They are the world’s largest steel manufacturer, with an estimated annual production capacity of 874 million tonnes. It is the domestic market who is the biggest consumer of steel, used in property development and infrastructure. Over the last 15 years China’s steelmaking capacity has doubled (subsidised by Government funding). However, with the global slowdown mainly led by China the demand for steel has declined considerably. The cost of steel per tonne in 2008 reached $1,100 a very different view to the $305 reported at the start of 2016.
Last month saw a number of global ministers, including China – meet to discuss the measures of the global excess steel capacity and how to tackle the situation as it currently stands. No deal was reached from the talks and during the meeting the USA blamed China for the chronic over supply.
China’s Deputy Commerce Minister said that China has taken measures to deal with the problem and has already managed to cut 90 million tonnes of steel production capacity and plans to reduce it by a further 100 – 150 million tonnes. The meeting did however highlight a division between other steel producing countries and China.
Excess steel is exported by China rather than being absorbed by the domestic market. The USA have already moved forward with anti-dumping duties on steel from the rest of the world and China, with the EU also considering following suit by adding fresh tariffs on Chinese steel. Over time these cuts will reduce exports, which overall will not have a positive impact on the steel industry.
There have been reports in the industry that signs of economic strength in China and a broader commodities rebound have begun to see a reverse in the drop of steel and iron. However it is considered that there will not be any immediate impact on the already predicted price increases.
*http://www.indonesia-investments.com/news/news-columns/steel-price-rises-but-china-and-other-steel-producing-nations-divided/item6733