The Canadian Tooling & Machining Association (CTMA) says that steel prices have slumped based on a weakening of demand.
The information comes courtesy of Dundee Recycling, the association’s sole scrap dealer member company.
According to the information from Dundee, steel prices essentially collapsed in May through early July. The Russian invasion of Ukraine caused prices to rise in Europe and the United States, but they were already back down by mid-July. The question is whether the rapid collapse continues, meaning steel prices fall fast and reach a bottom by the end of 2022, or whether the remaining decline stretches into 2023.
The second scenario seems to be the most favoured one, as prices consolidate when electricity and natural gas shortages restrain steel production. Risk, however, is dominant to the downside. In fact, the only strong upside risk through the end of 2022 is energy shortages become so severe that steel production is cut severely.
Steel supply fears are largely gone, Dundee says. The almost immediate recovery in Russian exports of ore, scrap, and semifinished means that steel production disruption has not been significant in Europe or North America. Almost the only upside risk to steel prices is an embargo of Russian steel and raw materials. However, this appears unlikely as all political effort has targeted petroleum.
World crude steel production has declined across all regions over the first five months of the year, with India as a notable exception. Steel production declined four percent y/y over the first five months of 2022 in Europe and is likely to continue to soften over the remainder of the year as demand weakens and energy costs soar. Steel production in the United States declined two percent y/y through May, largely reflecting production cuts at sheet mills amid weak demand from the automotive sectors.
Key steel consuming markets are facing increasing headwinds over the second half of the year, especially in mainland China, which accounts for more than 50 percent of global steel consumption. The near-term steel demand outlook has also softened considerably in Europe as energy prices soar and shortages loom. In the United States, inflation and interest rate increases continue to surprise on the upside, weighing on steel demand expectations for the second half of the year and 2023.