Key takeaways from the latest Steel Raw Materials Market Tracker

The latest forecasts from Fastmarkets’ team of analysts are ready to view.

A 6% decline in the daily average 62% Fe iron ore fines benchmark last week contributed to the lowest quarterly price rise for the first quarter in five years, in spite of clear evidence of supply-side constraints. Although there were clear demand-related obstacles to iron ore suppliers raking in more typical, seasonal price rises in the period, we view the 1.1% price rise – to $89.92 per tonne cfr China – as a relatively weak performance and one that now threatens our pre-Covid-19 outlook of $79 per tonne for this year.

It has certainly been unsatisfactory to local Chinese miners who last year recorded the biggest profit gains of any major part of China’s industrial complex. In the first two months of this year, data just published reveals that iron ore mining profits fell by more than 80% year on year; the worst performing industry. It will only be small consolation to steelmakers downstream that their minuscule profits have actually fallen by less than China’s industrial average.

Outside of China, steelmakers appear under much more demand-related pressure. We estimate that the decline in non-Chinese steel demand we observed last year – the first in five years – actually accelerated at the start of this year, even before the impact of Covid-19 was felt. A trusted way to observe the fundamental malaise right now is through our latest scrap price assessments, which are the most directly affected by steel production cuts. This week, we highlight the acute downturns across key Asian markets in just the past seven days. Only automotive-related prime scrap prices are holding up, given the dearth in new production.

For prime as for any raw materials today, sharp price cuts seem only avoidable through significant supply constraints, and this seems a particular concern to alternative metallics industries, where some of the key merchant buyers in the world – such as Italy – are under extreme lockdown conditions. But key suppliers, so far, seem relatively unscathed.

Yet if demand were to outperform business plans and expectations, the pricing outlook could once again dramatically change. Judging by key sentiment indicators in China, such as the manufacturing and perhaps even more relevant non-manufacturing purchasing managers’ indices (PMIs) – given the latter focus on construction – the February downturn is looking like a “blip.” We have revised our second-quarter demand outlook downward across the world, but to the extent that we are underestimating the seasonal strength to come, so we are underestimating the price outlook.

Click here to view the Steel Raw Materials Tracker in full. If you are not a subscriber but would like see a free sample report, please click here.

What to read next
European energy analysts’ “what if” questions have turned into “what now” questions in the wake of Russia’s stalled war efforts against Ukraine
Despite the metal being classed as “strategic” in the European Union’s proposed Critical Raw Materials Act (CRMA), questions remain about the future of magnesium supply in Europe, market participants have told Fastmarkets
The publication of Fastmarkets’ assessment of the Southeast Asia copper premium for Tuesday March 28 was delayed due to a scheduling error.
Recycling is increasingly being considered the best way to reduce carbon emissions from metals production, and huge investment in recycling facilities has been seen in recent years, with robust merger and acquisitions activity
As the world moves toward a shared goal of net-zero emissions, Claire Patel-Campbell talks to Outokumpu’s head of group sustainability, excellence and reliability about the place of the energy-intensive and high emissions ferro-chrome industry in a greener economy
Energy has been at the top of the agenda for the ferro-chrome market over the last couple of years, as prices fluctuate and access to steady supplies becomes more uncertain
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
Proceed