Asian steel prices will have limited support in Q3 – S&P Global

In Q3 2024, Asian steel markets will receive limited support due to weak seasonal demand, as well as the persistence of negative forecasts for the real estate and construction sectors in various markets. This is stated in the review of S&P Global.

Scrap prices, according to market participants, will also be under pressure.

In particular, hot-rolled coil quotations in Asia are likely to remain limited in the third quarter due to weak demand in the processing market and persistent raw material prices.

The structure of trade flows in Asia may change due to increased competition from Japanese and South Korean steel mills. Low domestic demand and the depreciation of the local currency force manufacturers in these countries to rely more on exports. As a result, Chinese HRC supplies are losing Japan and South Korea as destination markets.

Weakening exports put pressure on Chinese hot-rolled coil prices in the second quarter of this year. Spot prices for SS400 steel FOB China averaged $522.92/t in April-June, down 4.2% from the previous quarter, according to S&P Global.

The export of billets from China, on the other hand, is gaining momentum. At the end of May, it partially slowed down due to a decrease in competitiveness on international markets, but the situation changed in July. Domestic prices for these products weakened amid subdued demand and the rainy season. This trend is expected to continue in the third quarter.

Exports of rolled products from China continue to grow, which indicates that domestic demand is unable to absorb high production volumes.

Domestic steel prices in China are expected to continue to fluctuate at low levels until the end of the summer amid subdued demand, relatively high production and expectations of support measures from the authorities.

Another reason for the negative sentiment is growing concern about increased inspections of steel exports to combat VAT evasion, which could lead to a reduction in VAT.

Scrap prices in Asia continued to decline in the 2nd quarter after falling in January-April amid high electricity prices, weak demand in the manufacturing industry, They also fell on the marine market, where there was an active offer from sellers of this raw material and a sufficient amount of cheap billet at competitive prices.

Buying activity in normally active regions such as Taiwan, Vietnam and South Korea was very subdued in the second quarter, and market participants expect weak demand and low scrap prices to persist until the end of the third quarter.

As GMK Center reported earlier, the growth of Chinese exports leads to a decrease in global steel prices, and overproduction in China continues. According to major steel companies, prices for hot-rolled coils in the Southeast Asian market have fallen sharply from around $700-900/t (including freight) in 2021-mid-2022 to a range of around $510-520/t due to increased exports from China.