Steel Sector Monitor Sector Report :Global pricing remains under-pressure By Yes Securities
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The global steel prices continue to remain under-pressure owing to the strong steel production from China and a weak steel demand leading to higher exports from the country.
* The housing sector remains stressed with the government’s stimulus packages not yet showing signs of a turnaround, translating into a weak demand for the steel sector in China. WSA estimates a 1% contraction in the country’s steel demand for CY24. China has been forced to dump excess steel to other nations like India, Middle East, and South Korea.
* The rise in the exports since the start of CY24 has been sharp, averaging 8.75 mn tonnes on a monthly basis (vs average of 7.60 mn tonnes in CY23), causing the Chinese HRC prices to fall from the highs of ~$570/t in January 2024 to ~$490/t by the end of July 2024.
* The Indian steel demand however remains robust encouraging the domestic steel producers to add more capacities in the upcoming two to three years.
* On the iron ore front, the prices in India remain elevated (vs CY23) despite facing a Rs 1,000/t price cut during the months of monsoon. Iron ore demand in India is expected to remain strong as new steel capacities are being commissioned and are in various stages of ramping up to full utilization levels.
* Iron ore mines, however, are not expanding with the same trajectory and we can witness a supply tightness in the industry. Such a scenario should cushion the price fall and enable iron ore prices to firm up.
Our View
We see that the global steel prices will remain under-pressure, however, will show some signs of recovery with production cuts in China expected during the second half of the year which could eventually translate into lower exports from the country. On the iron ore side, we believe that the domestic iron ore prices could witness initial signs of recovery with the conclusion of monsoon season. This should primarily benefit the domestic miners like NMDC and GPIL
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