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The Steel Market Is In Chaos As Demand Uncertainty Grows

Last Month, MetalMiner reported that stainless steel cost had been holding strong amid high demand and increased production. However, we did identify some cracks in what might otherwise look like a solid recovery. As we transition from Q2 to Q3, some of those cracks have grown significantly.

Low Demand in China Affecting Stainless Steel Cost

According to a recent report from the Shanghai Metals Market, prices are seeing downward pull due to low demand. Though mills are optimistic that Q3 will bring more orders, warrants remain down thus far. As indicated in the report, “In the spot market, the market is uncertain about when the dropping of stainless steel prices will come to an end. Traders mainly hold a pessimistic outlook for the recovery of consumption.”

“Pessimism” seems to be the word of the day when it comes to the Chinese economy and stainless steel cost. President Xi Jinping hasn’t been shy about using his government to spur growth. Even so, reports from organizations like Fortune think the stimulus plan remains too weak to save the ailing economy.

All in all, the company’s strict adherence to zero-COVID initiatives and the crippling lockdowns that result are just big a drag on the economy. Combine this with the worst property market decline on record, and it’s no surprise why steel costs are in danger. In the end, no amount of supply can make up for lack of buyers.

Meanwhile, Steel Manufacturers in the EU are Talking Rebound

The European stainless steel market seems to be enjoying all the optimism China lacks. Recent estimates published in S&P Global are predicting a significant rebound in Q3 and Q4. Specifically, experts see the market rebounding almost to pre-COVID levels. This would be equivalent to around 1.2 million mt of finished longs for 2022. This represents a significant improvement over the 1.05 million mt produced in 2021.

According to Emilio Giacomazzi, the sales director at Cogne Acciai Speciali in Italy, “We recorded a jump in demand for stainless steel after the COVID pandemic. Since May the market has been in a pause as stocks are high…but overall demand is good.” Though raw material prices (like everything else) are up, sectors like auto, oil, and aerospace are buttressing prices with demand.

In the US, Oil and Gas Expansion Could Spur Steel Demand Further

The oil and gas industry remain one of the biggest consumers of stainless steel products. The production of pipes, pumps, tanks, and valves are all dependent on stainless steel. Just last week, Targa Resources signed a multi-billion-dollar deal to purchase operations in the Permian Basin. Lucid Energy previously owned the operation, but Targa committed to dramatically expand its regional presence. If this comes to fruition, the 600,000 acres will necessitate a lot of stainless-steel materials.

Though the public standoff between the Biden administration and oil and gas producers will likely continue, things are a bit different behind the scenes. Recently, industry execs sat down with Energy Secretary Jennifer Granholm in a meeting that both described as “productive.”

According to the American Petroleum Institute, the discussion sends “a positive signal to the market that the US is committed to long-term investment in a strong US refining industry and aligning policies to reflect that commitment.” If true, this could create a space where green energy and traditional energy can peacefully coexist.

When Will the Stainless Steel Rally End?

Many industry insiders have already published reports expecting steel prices to retreat over the coming months. It’s true that global prices, which have skyrocketed since October 2020, seem to have peaked. Supply is back, and demand seems shaky from country to country. Still, only time will tell if (and where) steel prices will find new support.

By AG Metal Miner

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