The global steel industry is expected to edge back into growth this year in spite of waning Chinese demand, at a time when low prices for the metal are casting a shadow over producers.
World production of crude steel will rise by 0.15 per cent in 2016, according to a Financial Times survey of 18 analysts, with renewed expansion in the US and Europe offsetting a second consecutive year of contraction in China, which makes nearly half of all steel.
Any pick-up in a sector viewed as an indicator of global economic health will come after a difficult year that saw the first annual production decline since 2009. Output shrank by 2.8 per cent in 2015, according to the World Steel Association.
However, several of those polled predicted a continuation of the tough market conditions that have pushed many producers into losses.
Ingo Schachel of Commerzbank said: “It will continue to be a challenging year for global steel companies. Profit margins and price levels [are] still very unsatisfactory and it’s hard to see a short-term improvement.”
A supply glut and faltering demand made steel cheaper in 2015 than at any time in the past decade. Four of the world’s biggest producers — ArcelorMittal, US Steel, SSAB of Sweden and Tata Steel of India — have either had their credit rating downgraded or put on negative outlook by Standard & Poor’s since November, while Posco of South Korea recently posted its first annual loss.
Some relief could come from a reversal in the surge of cheap exports from China, which has been seeking overseas buyers as its economic slowdown hits domestic use and which many companies blame for the dramatic fall in prices.
Source: Financial Times