International steel and iron ore prices will accelerate down
The steel market in 2008 experienced a dramatic transformation. In the first half of the year, domestic and international steel prices surged relentlessly. However, as the global financial crisis deepened, the threat of an economic recession loomed over the steel industry, leading to a sharp shift in market dynamics.
At the 6th China Tungsten-Molybdenum-Vanadium Industry Situation Symposium held on the 16th, it was revealed that steel demand had begun to decline significantly. Industry experts suggested that the world economy would enter a period of adjustment. With the economic slowdown, resource prices, including those of steel and iron ore, were expected to fall. This marked a turning point for the sector, which had previously enjoyed strong growth.
Many steel mills faced severe losses and contract shortages, forcing them to cut production. Major companies like Baosteel, Maanshan Iron & Steel, Laiwu Iron & Steel, and Jinan Iron & Steel announced plans to reduce output by 20%. Private steel companies, struggling with declining orders, found themselves in a tough position, with some even halting operations. At the symposium, officials from the State Council and representatives from private steel firms discussed the challenges, noting that although China’s steel exports hit a record high in July and August, they now face significant hurdles. It is unlikely that exports will grow in the fourth quarter, and a slight decline is possible.
A senior executive at a heavy machinery firm, who chose to remain anonymous, told reporters that the contract growth rate slowed in the first half of the year, and orders in August dropped sharply compared to the same period last year. The weakening demand for steel is inevitable, and this trend is expected to directly impact steel prices in the coming months.
Industry analysts noted that in the second half of 2008, inflationary pressures led to a sharp slowdown in global economic growth. European, U.S., and Japanese economies saw growth rates around 1%, with some forecasts predicting negative growth in the U.S. during the fourth quarter. Developing countries also experienced a decline in economic activity. This short-term economic cycle was driven by excess supply and rising resource prices, which fueled inflation and created financial risks. The subprime crisis, originating in the U.S., became a major factor in the global economic downturn, continuing to weigh on markets worldwide.
As stock, real estate, and commodity prices plummeted, financial risks from speculative activities became evident. The global economic recession, driven by inflation and financial instability, is expected to further weaken steel demand and push prices lower.
In the first half of the year, the surge in steel prices spurred rapid investment and production. According to the International Steel Association, total crude steel output from 66 major producing countries reached 696 million tons, up 5.7% year-on-year. Excluding China, international crude steel production rose by 3.5% to 4.3286 billion tons. However, by August, the pace of growth began to slow, signaling a potential shift in the market.
Analysts warned that Chinese steel companies must be cautious in the fourth quarter, facing two main risks: a continued economic slowdown that could weaken steel demand and affect pricing, and a lack of stable market mechanisms due to previous price volatility. Ma Zhongpu suggested that export tax rebates should not be canceled, and policies should be adjusted to support the industry. Companies should develop pricing strategies that help stabilize the market amid weak demand.
Additionally, reduced steel demand has impacted the purchasing behavior of special steel companies, affecting the volume and price of tungsten, molybdenum, and vanadium alloys. In response, alloy producers must also control output and implement pricing strategies that promote market stability.
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