- Activity in China has picked up, and although the impact from the Covid-19 did not spare the country with its gross domestic product contracting at its largest rate since recording began in the 1990s, the latest crude steel output figures for April from China’s National Bureau of Statistics show a strong recovery, albeit still at a lower rate than any year-on-year growth for any month last year. As a result of the coronavirus impact, we have revised down our Chinese crude steel forecast for this year and we no longer expect to see year-on-year growth until the first quarter next year.
- On the supply side, however, seaborne volumes remain tight with continued restrictions in Brazil, which has added to the supply side risks. The increased concerns about supply disruptions from Brazil have been more impactful on prices than we expected and have pushed prices above $90 per tonne, but we anticipate this prices to decline as the restrictions in Brazil ease.
- In the metallurgical coal market, although China's demand picture might seem encouraging for seaborne suppliers, elsewhere the situation remains challenging, and China's demand alone may not be enough to provide sustainable support to prices. Demand-side issues persist in the seaborne coking coal markets, in particular in India and Japan, after supply tightness had supported firm coal prices earlier in the year. Moreover, both steel and coke margins remain tight.
- In the ferrous scrap and iron metallics markets, prices in the rest of the world appear to have decoupled from the Turkish import scrap market, which traditionally has been a leading benchmark for markets globally. In particular, European domestic scrap markets are more likely to be guided by domestic dynamics in the near term, we expect, as lockdown restrictions are eased.
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