Steel Market Forecast for 2016 Slightly Optimistic

Steel market forecasts for 2016 call for a slight rebound in demand, which could boost depressed scrap metal prices.

Recovery is contingent upon consumption increasing in China, where demand and prices have dropped precipitously.

The World Steel Association (worldsteel) projects global steel demand to increase by 0.7 percent in 2016 after decreasing by 1.7 percent in 2015. “We expect the current headwinds to moderate in 2016 but this is based on a belief that the Chinese economy will stabilize,” World Steel Association Economics Committee Chairman Hans Jürgen Kerkhoff stated, in a release announcing the worldsteel Short Range Outlook 2015-2016.

Crude steel production declined by 3.1 percent in October in China compared to the previous year, mirroring a decrease of 3.1 percent in world crude steel production between the same periods, according to a worldsteel report on October 2015 crude steel production.

Steel prices have decreased by more than 33 percent in China in 2015, reaching a record low of 1,733 Chinese yuan (about $272) on Nov. 18.  “With China producing 800 million tons of steel a year—four times more than any other country has ever produced—the sector is in severe overcapacity of some 400 million tons as construction slows in the world’s second largest economy,” CNBC reported in an article on why China steel prices hit record lows.

Scrap metal prices have also plunged. Sims Metal Management cited a 30 percent drop in ferrous prices from mid-September to November in announcing cost-cutting initiatives for North American scrapyards on Nov. 18.

Photo courtesy of worldsteel.