Global steel prices to drop in second half of 2016: BMI

The Dollar Business Bureau

Globally the price of steel is likely to drop in the second half of this year, after increasing during January-June, due to decline in demand from the world's largest consumer, China. However, 2017 will bring in good news for the market if the pricesincrease, BMI Research, revealed in a recent report.

"We expect the January-June 2016 steel rally to fade and prices to head lower, in the latter half of 2016 as declining Chinese steel demand growth, stemming from a slowdown of the country's construction activity, will result in an oversupplied market," said the firm. 

The firm predicted that the metal would trade between $450-520 a tonne during the second half of the current calendar year, with the median prices for the whole year nearing $480 a tonne. 

“During the first half of this year, the prices of steel saw an upward trend on account of increased demand from steel users of China restocking the metal, optimistic sentiments of investors and stimulus measures taken by the Chinese government for the housing market,” the research report revealed.

With regard to next year’s outlook, the firm said, “While we predict the rally in steel prices during January-June 2016 to fade over in the second half, the metal prices will slowly move up 2017 onwards, in the wake of supply moderation in China.”

“The world’s steel market will witness an excess of 2 million tonnes in the current year, a drop from a surplus of 12.2 million tonnes from the last year”, it added.

But next year it predicted that the steel market will tighten up and may have a shortfall, dropping the ratio of stocks-to-use to 11.6 percent by the year 2020 from 13.6 percent this year.

Despite the shortfall, prices will stay low by historical standards. For example, an average of 2016-2020 period of $518 a tonne is considerably less than the yearly average of $667 per tonne during the period of 2011-2015.