The president of the BIR ferrous division has said that the outlook for ferrous metals is positive.
Writing in the latest Ferrous World Mirror, Sims Group’s William Schmiedel said that the beginning of 2017 has seen a rise in steel prices in key markets such as China, Europe and USA.
He added: “We have reasons to believe the outlook for the global steel market this year will for the most part be positive. Finished steel demand is projected to grow about 1.5% worldwide. China’s steel demand is expected to be flat which would mean the rest of the world’s would increase by about 3%.
“Certainly manufacturing in the USA and the EU is stronger and there is no denying that higher oil prices spur steel demand in oil-producing economies. Global steel capacity utilisation rates are projected to rise after a four-year contraction and China should continue to lead that with another capacity cut of 50m tonnes in 2017, derived from the shutting-down of “illegal” induction furnaces.
“Prices followed upward and in China, for instance, the first quarter of 2017 showed an 18% increase from last year’s fourth quarter for rebar. Similar gains on flat rolled were seen in the USA and EU. So while Chinese production has held, exports have declined dramatically; these averaged 9.5m tonnes a month in the first half of 2016 and then 8.6m tonnes per month in the second half, whereas the average for the first quarter of 2017 was 6.9m tonnes a month.
“Why so? The biggest reason is that Chinese domestic demand has been robust, driven both by the government and also the private sector credit stimulus. Certainly the liquidity caused by the Negotiable Certificates of Deposit (NCDs) that are being used by the private sector seems to be effective.
“The second reason is the trade barriers enacted by many of the world’s consuming nations. On the steel scrap side, we are seeing the results of the diminished steel exports from China as the electric arc furnace sector in South East Asia has finally increased the utilization of its furnaces and is now able to import ferrous cargoes. Mills in South East Asia and India are now actively buying again. The world’s biggest ferrous importer, Turkey, has seen wild swings month to month; there are many reasons for this volatility, but the geopolitical ones have certainly been a major factor.
“Are these conditions sustainable for the remainder of the year? It is too early to tell as we are yet to see if the domestic demand in China holds. For now, however, the industry is in a much better place than this time last year.”