Steel prices drop as demand forecast trims, China’s real estate crisis escalate
|- Steel prices are having a nightmare as foreign investments in China will trim Sino-US tensions.
- The prolonged property crisis in China is forcing steel mill owners to go bankrupt.
- Goldman Sachs has trimmed the demand for steel by 5% for the CY2022.
Steel prices have shifted into a bearish trajectory as downside risks have escalated after the market participants trimmed the demand forecasts for steel going forward. Analyst at Goldman Sachs has cut the steel demand by 5% for CY2022.
A steep cut in steel demand is backed by escalating China’s real estate crisis. Real estate has been vulnerable in China for the past year, led by a shift in spending patterns in the household after the Covid-19 pandemic. Apart from that, infrastructure spending has been slowed down sharply in China. It is worth noting that the property sector addresses one-third of steel demand in China.
The property crisis has forced steel mill owners to ditch production as higher stockpiles due to weak demand forcing them into bankruptcy. Going forward, the demand for steel will likely remain muted on escalating Sino-US tensions over Taiwan.
Death threats to US House Speaker Nancy Pelosi on her personal visit to Taiwan may result in sanctions on China by the US administration. Adding to that, foreign investment in China could trim significantly and the property crisis could greatly extend.
Meanwhile, rising interest rates by the Western central banks will keep hurting the steel demand. Price pressures have increased significantly and to contain the same, the central banks have resorted to policy tightening measures. This will force the corporate players to spend the costly money wisely on investment projects and construction activities.
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