Since November — Coinciding with Donald Trump’s victory — U.S. steel prices have been on a tear.
However, in February momentum started to cool down. It’s now buyers’ job to determine whether this is a major peak or just a pause within this bull market.
Chinese Steel Capacity Rises in 2016
In February, a report by Greenpeace East Asia and Chinese consultancy Custeel stated that despite China’s high-profile efforts to tackle overcapacity, China’s operating steel capacity increased in 2016. The report says that 73% of the announced cuts in capacity were already idle — in other words the plants were not operating. Only 23 million metric tons of cut capacity involved shutting down production plants that were operating.
Meanwhile, some 49 mmt of capacity that had previously been suspended was restarted, and 12 mmt of new operating capacity came online. That means that China added 37 million metric tons additional operating capacity in 2016.
This news is bearish for steel prices and it is likely contributing to lower steel prices in February, both in the U.S. and China. Read more