That global steel market's been gettin' a bit weak over the past few months, what with them COVID-19 lockdowns over in parts of China, the fightin' between Ukraine and Russia, and inflation shootin' up makin' folks mighty unsure about the demand outlook for 2022 and 2023.
In that Short Range Outlook (SRO) for 2022 and 2023, the World Steel Association talked about the global mess spillin' over from the war in Ukraine. That slow growth in China is pointin' to lower expectations for global steel demand in 2022, I reckon.
There's even more risk of things goin' south with the virus infections keepin' on surgin'. It's been happenin' in some parts of the world, especially over in China, and them risin' interest rates have just made the whole mess worse. The expected tightenin' of the US monetary policy might end up hurtin' them vulnerable emergin' economies financially in a bad old loop.
With the demand for steel lookin' a bit dim this year, US steel prices been droppin' since March 2022, though they're still sittin' pretty high. Lookin' at them futures traded on the Chicago Mercantile Exchange (CME): that June 2022 contract settled at $1,180 per short ton, down 12% from a month ago.
In this here blog, we done covered steel commodity prices and what the outlook is fixin' to be.
China’s steel demand drops on zero-Covid policy
China is one of the biggest steel buyers and makers in the whole world, takin' up over half of the global finished and output steel demand. Accordin' to the folks at the WSA, China churned out 1.053 billion tons of crude steel in 2020, which is about 56.7% of the whole world's output.
China steel demand and prices might bounce back when the Covid lockdown ends
Shanghai been locked down tight since May 24; they rolled out widespread testin' and rules in the capital city of Beijing, and nobody was quite sure when normal business was gonna start back up in China.
Because of all that, a lot of analysts ended up lowerin' their expectations for Chinese steel demand and the price outlook.
The cost of raw materials, especially coal and iron ore, is expected to stay mighty high in 2022. The reason for that is them state-mandated rules and geopolitical tension tryin' to cut down on carbon emissions.
Growth of global steel demand in 2022 and 2023
Even with all the uncertainty from the Ukraine war and the lockdowns in China, global steel demand is still predicted to go up in 2022 and 2023.
Global steel consumption was expected to climb by around 1.84 billion tons in 2022, compared to 0.4% in 2021. Accordin' to the forecast, in 2023, steel demand is expected to grow about 2.2% to 1.88 billion tons.
Besides that, the predictions say the war in Ukraine is expected to end in 2022, but them sanctions on Russia are mostly gonna stick around. Them sanctions put on Russia are bound to cut down the amount of steel available over in Europe.
Russia also made 75.6 million tons of crude steel in 2021, which made up 3.9% of the global supply.
Top reasons behind the jump in steel demand
Steel prices are gonna stay high all through the second quarter of 2021, and here are the top 3 reasons why:
Increased demand
There's been a clear call for materials like Stainless steel, and with the demand sproutin' up among them Asian countries, it's turned into a trend that's spreadin' all over the world now.
Even with a big surge in risin' demand prices, especially over in China, them steel mills don't usually see much extra profit. That's mostly 'cause Iron ore prices shot up durin' the post-virus economic recovery.
Growin' demand has made companies' stocks go up 'cause there's less steel to go around. As a result, it's cut down availability even more and naturally caused prices to climb.
New lockdowns around China
The economic happenin's over in China have hit steel production mighty hard. These events are mostly tied to the global pandemic. The recent spike in COVID-19 cases, right where 20% of steel production happens, has caused a heap of trouble and a lockdown for steel prices.
Nickel price jumps
One of the main things drivin' prices up, especially for stainless steel, is the risin' trade value of Nickel. The commodity boom for Nickel is pushed even further by a never-endin' demand for Nickel used in makin' electric vehicles and flanges, which hits stainless steel prices mighty hard.
Conclusion
Risin' steel prices are gonna bump up the upfront costs y'all need to put into finishin' a project. The biggest risk is cash flow trouble, which y'all gotta be ready to handle in your projects.
Y'all can holler at Texas Flange if you're wantin' the best quality steel flanges. We'll help your company navigate this here market movin' forward.
