Asian steel prices will see limited support in Q3 – S&P Global

The reasons for this are weak seasonal demand and problems with exports

In the third quarter of 2024, Asian steel markets will receive limited support due to weak seasonal demand as well as continued negative outlooks for the real estate and construction sectors in various markets, according to S&P Global's review.

According to market participants, scrap prices will also come under pressure.

In particular, prices for hot-rolled strip in Asia are likely to remain limited in the third quarter due to weak demand in the processing market and persistent raw material prices.

The structure of trade flows in Asia may change due to increasing competition from Japanese and South Korean steel mills. Weak domestic demand and the depreciation of the local currency are forcing manufacturers in these countries to rely more on exports. As a result, Chinese HRC suppliers are losing Japan and South Korea as target markets.

In the second quarter of this year, weaker exports put pressure on Chinese hot-rolled coil prices. According to S&P Global, spot prices for SS400 steel FOB China averaged USD 522.92/t in April-June, down 4.2% from the previous quarter.

Exports of billets from China, on the other hand, are gaining momentum. They slowed down at the end of May, partly due to declining competitiveness in international markets, but the situation changed in July. Domestic prices for these products fell due to subdued demand and the rainy season. This trend is expected to continue in the third quarter.

Exports of rolled products from China continue to rise, suggesting that domestic demand is unable to absorb the high production volumes.

Due to subdued demand, relatively high production and expectations of supportive measures from the authorities, domestic steel prices in China are expected to continue to fluctuate at low levels until the end of the summer.

Another reason for the negative sentiment is growing concerns about increased controls on steel exports to combat VAT evasion, which could lead to a reduction in VAT.

Scrap prices in Asia continued to decline in Q2, after declining in January-April due to high electricity prices and weak demand in the manufacturing industry. There was also a decline in the shipping market, where there was a lively supply from sellers of this commodity and a sufficient amount of cheap billets at competitive prices.

In normally active regions such as Taiwan, Vietnam and South Korea, buying activity was very subdued in the second quarter and market participants expect weak demand and low scrap prices to continue until the end of the third quarter.

As GMK Center previously reported, the growth of Chinese exports is leading to a decline in global steel prices, and overproduction in China continues. According to major steel companies, hot-rolled coil prices in the Southeast Asian market have fallen sharply from around USD 700-900/t (including freight) in 2021-mid-2022 to a range of around USD 510-520/t due to increased exports from China.