The recent slide of Chinese steel prices is likely to threaten the short-term sustainability of world steel values. MEPS’ research indicates that decreases in selling figures in China are usually a precursor for negative price pressure to be applied on world markets.
Chinese steelmakers, which are responsible for around half of the world’s production, have previously been accused of selling material at below cost, in order to offload their excess supply. Amid a weak domestic trading environment, Chinese suppliers could be encouraged, in the coming months, to increase their export volumes. However, MEPS have reports that a number of Chinese steel manufacturers intend to bring forward planned maintenance work, as a consequence of the sliding spot prices.
Despite the likelihood that world prices have reached their peak in the current cycle, MEPS forecasts that global steel producers should retain a large proportion of the price gains they secured from the beginning of 2016. The introduction of a number of countervailing and antidumping cases, notably in North America and Europe, will give steelmakers, in these regions, a degree of protection from the direct threat of low priced imports.
No country is immune to the ripple effect caused by reduced Chinese export prices, which are traditionally the lowest in the world. However, the global steel marketplace is now, arguably, better prepared to withstand the repercussions.