Sluggish Start to 2019 for The Global Steel Sector

The recovery in global steel prices has stalled. A proportion of the steelmakers’ price gains secured in 2017/18 were lost in the final few months of last year. Import protection methods, via Section 232, in the US, and safeguarding measures, in the EU, failed to halt the slide of steel prices. Owing to a significant reduction in demand, most notably from the automotive sector, talk of mill price hikes, in Europe and North America, quickly subsided. The negative sentiment has continued, this month, across flat products, in particular. Steel market participants are, generally, unsure about the future pricing trend, due to a number of political and economic uncertainties.

MEPS’ January research indicates that a lack of seasonal restocking has been noted, so far, this year. Many steel buyers remark that they are reluctant to place new orders, in anticipation of further price reductions being offered. It is highly likely that the worsening macroeconomic climate in a number of European countries, and the UK’s impending exit from the European Union will give further cause for concern, during the course of the year.

Few indicators give reasons for optimism, currently, in the North American steel sector. The slowdown in auto sales, the diminishing impact of Section 232 measures and an uptick in domestic supply have contributed to a rapid decline in flat product selling values, in recent months. Many US steel buyers remark that further price erosion is likely, in the near term.

Despite existing trade legislation, MEPS highlights that the global steel market is hugely exposed, either directly or indirectly, to the actions of the world’s largest steelmaker, China. The recent deterioration in Chinese domestic and export prices appears to have been halted, ahead of the Lunar New Year holidays. It is projected that Chinese values will increase, in the spring of 2019, as local demand improves.

It is widely expected that the traditional recovery in flat products prices, at the turn of the year, will be delayed. Inventory replenishment, in world markets, is likely to take place in the second quarter. MEPS believes that the scale of any pricing revival will be modest – with political and economic uncertainty expected to continue to undermine market sentiment.