December Steel Price Forecast: HRC Price to Drop in 2016?

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Source: Adobe Stock/Jovanning.

The rest of the world may soon be affected by decreasing steel export prices in China as the world’s largest producer finds itself tightening its belt in the face of plummeting demand.

Colin Hamilton, Macquarie Group Ltd.‘s head of commodities research, told Bloomberg that they expect the price of hot-rolled coil to drop roughly 13% in 2016. With the drop in demand for infrastructure and construction in China, its steel exports are expected to stay at the inflated 2015 level of 100 million metric tons, for the remainder of the decade.

“We’re past peak steel demand,” Hamilton told Bloomberg. “I think provided there is overcapacity in the Chinese system, and given where demand is, it’s going to be like this for some time.”

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Hamilton added the industry is built for demand growth and that growth has been lacking. It’s also important to note that falling steel prices are, in part, driven by the collapse in raw materials and reduced output costs.

JPMorgan Chase & Co. and other banks have stated that China’s outbound shipments will peak this year with low prices and trade tensions forcing the hand of Chinese producers to start cutting back on output. According to Bloomberg, China’s crude steel production fell 2.2% to 738.38 mmt from January to November 2015.

“What may slow down the exports is anti-dumping and protectionist measures that several countries have taken against cheap imports,” Anjani Agrawal, global steel leader at Ernst & Young LLP in Mumbai said. “We’re going to see an impact. More and more countries are raising their objections.”

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