The negative impact of the COVID-19 on the steel market is expected to continue around the world over the next three months. The number of coronavirus cases has been growing rapidly in various countries, such as the US, Russia, Brazil, Mexico and Japan. As a result, we anticipate that finished steel demand is going to remain depressed in these countries.
Asia would have mixed market conditions. In India, the Monsoon season, between June and September is going to remove any support for the country´s steel demand, despite the government starting to ease the lockdown. The Indian Steel Association forecasts that Indian steel demand is going to fall 7.7% year-on-year in 2020. However, the fall could be even greater, to over 10%, and if a second wave happens, another lockdown could be imposed. Similarly, crude steel production in Japan is expected to fall by 26% year-on-year in Q2 2020, according to the Ministry of the Economy, Trade and Industry (METI).
In China, the government plans to increase construction and infrastructure spending as well as to cut interest rates for corporate loans to boost the economy. The results of these measures are likely to start from June onwards, and steel demand will see some additional uptick. Commodity Inside expects crude steel production to end up with a slightly higher growth rate in 2020, compared to the preceding year. NBS recent iron and steel data has already shown some signs of recoveries.
In Europe, the spread between HRC and slab is likely to continue to fall, further pressuring steel producers. Italy, Germany and Spain have started to ease restrictions though at a slow pace, which means that steel demand is likely to recover only partially over the next three months. Moreover, we expect imports (mainly from CIS and Turkey) to add pressure on European steel producers. The EU is going to be targeted by various countries (for example, Japan, USA, Mexico, India, etc.) to unload their excess supply.
We do not expect that the US would return to normality over the next three months. However, we are assuming that there will not be a second wave of fast-growing numbers of infected people, which means, no second wave of extensive lockdowns. As a result, steel demand industry is going to recover slowly. Commodity Inside expects steel demand to slow down this year, as the high unemployment will defer new sales of white goods and cars, the most important end-users of flat steel.
This article is based on excerpts from our steel subscription reports.
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