Posted on 21 Dec 2021
Chinese steel production will register a low single-digit decline in 2022, remaining above 1 billion tonnes, as slowing property sector demand will be partly offset by higher infrastructure spending and manufacturing, says Fitch Ratings.
The demand rebound in the rest of the world in 2021 was stronger than anticipated, with estimated output of 870 million tonnes in 2021, exceeding pre-pandemic levels a year earlier than expected. This was thanks to pent-up demand and stimulus measures, including the €750 billion ($845 billion) EU recovery fund and the recent $550 billion US infrastructure bill, with strong support for the energy transition, Fitch points out in a report sent to Kallanish.
Since the global recovery lags that of China, GDP growth in China is already cooling to a more normal rate of 4.8% for 2022, while other countries are still seeing above-trend growth. This also reflects in prices. Hot rolled coil traded at $1,799/short tonne in the US in November, versus $1,119 in Germany and $756 in China.
“The price detachment in 2021, during the pandemic recovery, is unprecedented, linked to trade barriers, lead times and logistical constraints,” Fitch observes. “The US and Europe will continue to benefit from materially above-trend margins in 2022, while China has mostly corrected already.”
The rating agency has identified the evolution of economic and environmental policies in China, and their impact on the steel industry as one of the main factors to watch. Also to look out for will be government stimulus across regions and the strength of recovery in key end-markets, and resolution of supply-chain bottlenecks, as well as evolution of protective trade measures in the US and EU. Moreover, policy commitments and support for steel decarbonisation by major economies will be crucial.
“We have assessed the sector outlook for global steel in 2022 as neutral,” says Fitch Ratings senior director, metals & mining Oliver Schuh. “We expect production volumes to remain strong in 2022, but at reducing, albeit above-trend margins. High capacity utilisation will continue to support strong cash flow generation, particularly outside of China.”
Source:Kallanish
