Market news
04.08.2022, 04:35

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 on 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 from the past year led by a shift in spending pattern 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 occurrence of the property crisis has forced steel mills owners to ditch the production as higher stockpiles due to vulnerable demand is forcing them bankruptcy. Going forward, the demand for steel likely to 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 property crisis could extend to a great extent.

Meanwhile, rising interest rates by the Western central banks will keep hurting the demand for steel. Price pressures have increased significantly and in order 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 the investment projects and construction activities.

 

 

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