Horfur fyrir ársbyrjun 2022 eru þegar orðnar mjög óvissar vegna annarrar bylgju Covid-19 sem gengur yfir heiminn og líklega gæti Omicron afbrigðið hægt á bata í stáliðnaðinum. Stálverðshreyfingin er að verða mjög ófyrirsjáanleg vegna mismunandi þróunar eins og peningamálastefnu, flísaskorts og eignaþróunar á mismunandi svæðum.
First of all, let's take a look at the China's steel demand. In fact, China's steel demand growth from the construction industry including property sector has largely peaked in the first half of 2021. The future new projects like public infrastructure from 2022 to 2025 will provide a certain support to the steel price. On the other hand, the property sector is facing quite serious financial issues which will certainly weaken the steel demand in the next 5-year period.
Furthermore, the chip shortage has caused the decline in automobile production and sales in China, and this situation will most likely continue throughout the 2022. Meanwhile the demand for steel in the machinery, automobile, shipbuilding, and other industries is expected to maintain a growth trend, while the demand for steel in the construction, energy, and container industries is declining. According to Institute of Metallurgical Planning' prediction, China's steel demand will be around 947 million tons in 2022, down 0.7 percent year-on-year; crude steel output will be 1.017 billion tons, down 2.2 percent year-on-year. Therefore, the relatively weak demand will put pressure on steel price upwards-movement in 2022.
On the supply side, Chinese steel production in 2022 is expected to rebound slightly following significant year-on-year declines from July-September as a result of the energy crisis that dented industrial production in order to reduce pressure on the power supply. Li Xinchuang, Secretary of the Party Committee and Chief Engineer of the Metallurgical Industry Planning and Research Institute, said that prohibiting new capacity due to carbon emission policy is the bottom line, and ensuring the result of capacity reduction is still the key task for the steel industry in the future. According to the Institute of Metallurgical Planning, 2021 China's steel consumption reaches 954 million tons, down 4.7 percent year-on-year; crude steel output is 1.04 billion tons, down 2.3 percent year-on-year.
Hvað árið 2022 varðar sagði Qu Xiuli, varaformaður og-framkvæmdastjóri járn- og stálsamtakanna Kína, nýlega að eftirspurn eftir stáliðnaði verði tiltölulega stöðug og veikari. Framleiðsla á hrástáli skortir grundvöll fyrir verulegan vöxt og erfitt er að endurskapa verulegar hækkanir á stálverði fyrir árið 2022.
In America, the US steel prices gone up over 200 percent in 2021 and expected to remain high into 2022, but some believe that the steel price is still little bit uncertain due to various reasons. Many believe that America's steel price is expected to remain high due to the massive outstripping of demand vs supply, and the steel mills will catch up and replenish the depleted steel stockpiles. The reason for the depleted steel stock is that during the initial months of the COVID-19 pandemic shutdowns, many steel mills halted production under the assumption the world was heading into a deep recession. However, decline in demand for iron ore and steel did not last long at all. Fairly early in the pandemic there was a change in spending habits and patterns of consumption, where instead of going on holiday or paying for house improvement, people were buying steel intensively related products such as new cars and home appliances. This change in spending has caused a far greater demand than expected in the steel industry, and at the same time, combined with a very limited supply due to the closing of many steel mills, led to the price of steel skyrocketing, with the futures price of hot-rolled steel up over 200 percent trading at 1,800 as of July 2021.
Furthermore, global supply chains also provide uncertainty in the price of US steel because the semiconductor chip shortage has reduced the production output of the automotive industry, reducing the demand for steel while this shortage continue to exist. Not surprisingly, the resolved the demand for steel in this industry will increase again, putting even more pressure on the price of steel. But, some experts say that in contrast to China, the outlook for steel demand in the US is more upbeat because "President Biden's infrastructure plan covering bridges, ports, roads and pipelines will involve traditional as well as new infrastructure with spending spanning over eight years. This new bill will certainly support the steel demand along with other green metals like copper for a time to come.
Last not the least, let's take a look at European steel demand, many believe that the steel price is expected to rebound following the collapse in 2020 due to Covid-19. European consumers, especially large automakers and electronic producers will most likely prefer European steel compared with Chinese steel. This is because European steel is mainly low-carbon steel produced at electric arc furnaces using scrap metal, while Chinese steel is mainly produced at blast furnaces requiring coking coal and iron ore. On top of that, the European steel makers are using much less coal-related energy, and that is regarded a more environmentally friendly approach. Right now, in Europe, the EPD (Environment Performance Data) program is gaining lots of support from the project owners, and it put mills or steel fabrication companies under press to use more trackable and renewable energy to reduce impact on environment. Another important reason of using European steel is that the horrific sea transportation cost and unpredictable transport leadtime have made exports from China less attractive.
Based upon global divergent trends, and the fact that businesses are more used to pandemic situation, we can almost visualize steel price global movement in different regions for the next 2 to 4 years. The steel price in China will most probably stay above the current price level (770/mt) throughout 2022. The steel price in Europe will continue at a high price level which is around €900/mt in 2022, and the HRC price in US might more likely to stay at 1100/mt level in 2022. From a 3-5 year point of view, the steel price might be dragged down by slowing Chinese steel consumption growth and rising global steel market protectionism which prompts greater production in both EU and USA, and the HRC might come down both from Europe and US from current level to 750/mt from 2023.
