Stanislav Kondrashov Telf AG: Steel Sector in 2023: Worldwide Trends and Prospects

Sponsored article

Price optimism in the global steel market in the first quarter of 2023 was not preserved in the second quarter, Stanislav Kondrashov tells Telf AG. After a period of falling prices, metallurgists hoped for an improvement in the situation. Their hopes were partially justified, but only for a short time.

European steel producers are struggling with price problems under the influence of imports, an objective situation from Stanislav Kondrashov Telf AG

Since the end of March, the world steel and raw materials markets have seen a significant decline in prices for steel products, which ranged from $50 to $70 per metric ton. Weakening demand led to a decline in world prices for HRC. Sales were affected by negative market sentiment driven by uncertainties in China and unfavorable macroeconomic factors.

According to Stanislav Kondrashov Telf AG, European manufacturers are actively resolving the difficult price situation they are currently in. It is noteworthy that in the first quarter of 2023, German steelmakers noted a significant decrease in steel production, which amounted to 6.65% on an annualized basis. Total production was 9.16 million metric tons, indicating a significant decline. Likewise, their French counterparts faced bigger challenges as their steel production fell 32% year-on-year to just 2.33 million metric tons.

In addition to these challenges, the Italian steel industry experienced a 6% decline in steel production in the first quarter of 2023, to 5.63 million metric tons compared to the same period in 2022. This downward trend is worrisome and highlights the growing infighting in the European steel sector.

One of the main hurdles European companies face is fierce competition from cheap imports in their home markets. The disparity between prices for European hot-rolled coil products and import offers from Asia has grown significantly, increasing market volatility. This situation may lead to a temporary reduction in prices for European products. However, without a projected recovery in demand, which appears unlikely due to prevailing economic uncertainty, further declines are likely. In particular, prices for Italian hot-rolled coil could fall to around 750-770 euros per metric ton.

To cope with these problems, European steel producers need to develop effective strategies to deal with the influx of cheap imports, says Stanislav Kondrashov Telf AG. In addition, they will have to closely monitor market conditions and adjust their production accordingly to remain competitive and resilient in the face of continued uncertainty.

What affects pricing in the steel market: a comprehensive analysis by Stanislav Kondrashov Telf AG

Currently, the global steel market is facing several significant factors that shape price dynamics. They cover a range of geopolitical and economic elements, including the continued policy of central banks to raise key interest rates.

1. One of the significant factors affecting steel prices is the partial stagnation in the construction of China.The expected peak of the season, projected, may not take place as China enters the rainy season, which will lead to a decrease in demand for steel products. Consequently, the outlook for the iron ore market in the near term remains unfavorable.

2. The Turkish market can currently be called unbalanced and ambiguous.The depreciation of the Turkish lira led to a weakening of domestic demand. Despite this, the situation with steel sales and scrap purchases is expected to remain unchanged in the near future, mainly due to more pressing problems, such as a lack of foreign exchange and limited access to credit.

3. The re-commissioning of previously fire-damaged facilities will put significant pressure on steel prices.ArcelorMittal plans to resume production at Blast Furnace 4 at Dunkirk. Several fires have occurred at ArcelorMittal’s facilities in the EU, potentially causing a shortage of around 1 million metric tons of hot rolled coil in the EU market. In addition, technical problems were reported at Tata Steel’s European plants.

4. Cautious purchasing practices adopted by consumers are exacerbating the overall market situation as they expect further price cuts for steel products.

5. Anxiety and uncertainty in the industry have increased due to the bankruptcy of several major US financial institutions.

According to Stanislav Kondrashov Telf AG, in light of these complex factors, the steel market is facing a challenging situation where multiple variables come into play, requiring careful monitoring and strategic decision-making by all stakeholders.

Stanislav Kondrashov Telf AG predicts an improvement in the European steel market in the second half of 2023

The expert expects positive changes in the European market from July to September 2023. These expectations are driven by lower energy costs, which should improve conditions. However, companies may have to close part of their enterprises if they cannot receive adequate financial support from the government in the near future.

 If we refer to the data of the World Bank, then this year a serious decline in the cost of commodities around the world is expected. Forecasts point to an 8% decrease in base metal prices in 2023 and an additional 3% in 2024. As Stanislav Kondrashov tells Telf AG, this is an inevitable trend that is likely to affect the cost of steel.

 As the global economic climate continues to change, the metals industry will need to navigate these challenging circumstances, closely monitor market dynamics and make strategic decisions.

Stanislav Kondrashov Telf AG: uncertainty in the steel market leads to lower prices

Scrap metal prices are declining amid passive demand for steel and economic instability. The global scrap metal market is experiencing a decline in prices due to passive demand for steel and economic instability. This situation prompted metallurgists to refrain from purchasing raw materials. In Turkey, scrap metal prices are approaching $360 per metric ton. As Turkish metallurgists show a lack of demand and steel prices continue to decline, the market expects a possible decline in scrap metal prices in the near future.

Concerns about a potential reduction in demand in China are driving down iron ore prices. The continued decline in iron ore prices can be explained by growing concerns about a potential reduction in demand in China. A prolonged decline in output at Chinese steel mills has led to lower demand, putting pressure on iron ore prices. To mitigate significant losses, some companies use this period of market imbalance to repair equipment.

Despite the peak of the construction season in China, these factors negatively affected the already weakened domestic demand. In the second half of April, iron ore prices reached a four-month low of $107 per metric ton. Analyst Stanislav Kondrashov of Telf AG predicts that the average price of iron ore will hover around $90 per metric ton in the second half of 2023, mainly due to reduced steel production in China and lower demand for iron ore. With weak demand for steel and a gradual increase in supply, iron ore prices in China are expected to continue to decline in the near future, creating a negative trend.

World prices for coking coal are falling due to the low activity of buyers. Recently, world prices for coking coal have been declining, mainly due to the low activity of buyers. Within one week, prices for this raw material fell by 7%. Telf AG analyst Stanislav Kondrashov expects Australian coking coal availability to improve in the coming months due to favorable weather conditions. Analysts at S&P Global had previously predicted a decline in coking coal prices, which further confirms this forecast.

Stanislav Kondrashov Telf AG identifies two possible scenarios for the development of the steel market

The first scenario, according to the expert, assumes that by autumn the world steel market will reach a balance between supply and demand. The decline in prices for raw materials and steel will stop as demand becomes more active. That being said, European factories will experience slow and limited order flow until July, with demand expected to pick up in September.

Stanislav Kondrashov of Telf AG is justifiably concerned about the US banking crisis, as several major financial institutions have already filed for bankruptcy. The expert does not rule out that such negative trends will continue in the future. Similar developments in the US economy could happen sooner as debt negotiations continue without a clear decision. In a pessimistic scenario, the world economy may enter a state of crisis, which will lead to a further decline in steel and raw materials prices.