Inflation, strong dollar challenge steel trade: Celsa’s Gordienko

High inflation is reducing steel demand, while the US Federal Reserve’s monetary tightening has resulted in the strongest dollar in 20 years, hitting the global economy.

This has reduced emerging market GDP growth rate by 2 percentage points and advanced economies growth by 0.65pp, with the impact on the latter to disappear within a year, according to Celsa Group export director Alexander Gordienko.

Germany, Europe’s largest economy, has entered recession in 2023. In the first seven months of the year, German demand for rebar and wire rod fell 17% on-year.

Largest economy the US is however outperforming. “The US construction sector is doing very well, particularly the boom in single-family homes. In 2023, 460,860 homes will be built, versus 1.2 million units between 2020 and 2022, with an average of 400,000 units/year,” Gordienko said at this week’s Irepas conference in Istanbul attended by Kallanish.

“The utilisation rate of Chinese blast furnace-route steelmakers is, on average, 97-98%, which is extremely high. Chinese real estate activity, which accounts for 30% of the economy, is declining, so the central government is offering incentives to support the sector. The interest rate cut is another form of support, [with the rate being] the lowest in 15 years. Chinese steel exports … will be slightly below 2015 and 2016, with an annual tonnage of between 85 and 90 million tonnes. Flats account for most exports this year, while longs are insignificant quantities,” Gordienko noted.

Overall, the global economy is gradually recovering from the pandemic and the Russian invasion of Ukraine. Supply chain disruptions have returned to pre-pandemic levels. Energy and food prices have fallen sharply. Global inflationary pressures are easing faster than expected. The European Central Bank raised interest rates to 4% last Thursday, while forecasting inflation of 2.8% next year. High interest rates are weighing on households and businesses, with high interest payments putting pressure on the housing sector, Gordienko observed.

The International Monetary Fund forecasts the global economy will continue to grow by 3% in 2023 and 2024. However, the “European economy remains very weak. Winter is coming, and energy costs are expected to increase,” Gordienko concluded.

Burak Odabasi Turkey