Fitch Solutions sees iron ore and steel production declining as the UK, EU and US economies slow alongside lower prices, Kallanish notes.
The research house says a decline in demand for steel alongside rising raw material prices will hit steel firms’ capital expenditure in 2023.
In the long term, it expects demand to rebound and production costs to stabilise.
However, it notes that steel producers will spend cautiously in 2023 as global economic growth stagnates.
Citing JSW Steel as an example, it says the firm announced in July that it will reduce its capital investment plan to $1.8 billion from $2.4 billion, on the back of downside supply and demand pressures.
Fitch Solutions also says that iron ore miners will face a significant increase in costs, with capex plans remaining tight.
Fortescue Metals, for example, has raised its annual cost guidance for 2023 from $18 per wet metric tonne to $18.75, and predicts capex to fall between $2.7 billion to $3.1 billion in 2023 relative to $3.1 billion in 2022, Fitch Solutions points out.
The research firm opines that higher costs and a drag in capital expenditure will lead to flat production growth for iron ore and a renewed focus on cost-cutting and managing current operations as opposed to investing in new projects.
Siew Mung Tan Malaysia
