Steel short-term outlook December 2021 Report

Commodity Market Report 23 December 2021

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Report summary

A ray of hope emerges from China as December output inches up with recovering demand, falling inventory and improving margins. However, the pain will continue in the first quarter of 2022 due to more onerous restrictions during the Winter Olympic games and Phase-II of winter cuts. As we draw closer to 2022, few questions arise - What lies in store for steel markets and prices? Do we foresee deterrents overpowering growth drivers? Will the resurgence of coronavirus infections leave the consumption activity in the lurch? We try to answer these in our December short-term outlook. Our December short-term outlook covers: • Demand sentiments and status of leading consumption indicators • Supply-side policies, risks and opportunities • Road-to-recovery and threat from a new wave of coronavirus infections • Steel price outlook and cost implications

China
- Demand pickup to erode inventory in December
- Improving demand coupled with tight supply and low inventory levels widened margins
- Increasing PM2.5 levels in Tangshan led to more stringent production cuts in December but daily crude steel production continues to climb up
- What to expect in Q1 2022
- Demand to remain range bound year-on-year
- Strict production curbs will continue to hit production
US
- Golden days poised to continue. Still, risks are mounting
EU and UK
- High energy prices in Europe continue to affect European steel producers’ costs
- Tariff-free quota to be effective for EU exports from January
- HRC market in Europe in a wait-and-see mode
- Interesting announcements linked to ‘green’ steel in Europe
- New UK EAF steelworks plans could become Europe’s first fully circular energy transition site
- And a huge $2.6 billion green hydrogen project is planned in the Iberian Peninsula
India
- Record year of steel production
- braced by highest-ever steel exports
- Tepid domestic demand to improve, backed by strong economic indicators
Japan and South Korea
- End-use outlook
- Green shoots to emerge in automotive, albeit on a low base
- Manufacturing stays put
- South Korean construction to edge out Japan
- Iron Ore
- Coal
- Scrap
- Green steel initiatives