Flat steel product prices still have room to correct down in the last quarter of 2022. The start of 2023 also looks like it will remain weak, but stabilisation is possible towards the second half of the year. This was the general consensus of the panel on pricing trends during Kallanish Flat Steel 2022 in Istanbul on Thursday.
There are numerous factors behind the current price decline. Most significant are China’s weak domestic demand, driven by its slowing real estate market and zero-Covid policy, war in Ukraine, and safeguarding measures by developed economies, such as Section 232 in the US.
Mammoth energy supply price increases in Europe and Turkey, caused by the sanctioning of Russian hydrocarbon supplies, are adding unbearable margins on production costs that are already among the highest in the word. This is making them uncompetitive against Asian suppliers, whose costs are unaffected but local demand is weak on economic challenges and China’s stifled demand growth.
Demand in the EU remains lacklustre, also affected negatively by the ongoing energy crisis and war on its doorstep. The looming or, in some observers’ opinion, already present recession, is sucking out optimism and consumer confidence, reducing demand further.
Mills are cutting production to battle low demand and reduce losses, while decarbonisation momentum is already in full swing and is pushing standards and costs further up still. In this extremely challenging, difficult time, the major economies are not expected to start recovering in less than 18 months, according to speakers, but as ever, there are factors that could spur a new growth cycle almost overnight, they added.
The return of Chinese demand growth would be the strongest upside factor, but a truce between Ukraine and Russia is another, eagerly awaited one. Alternatively, deeper output cuts are anticipated in Turkey and the EU, and a difficult two years ahead, followed by the new growth cycle.