The Steel Industry’s Decline

Summertime is supposed to be when the living is easy. At least that's how the old song goes.

However, with recession concerns swirling, consumer confidence waning and demand softening, this summer has been anything but easy on the US metal market.

At the same time, prices for a number of headline products – from hot-rolled steel to primary aluminum, ferrous scrap to pig iron – have been in a steady decline following a rapid runup in the early part of the year.

The upturn came just after domestic metals markets appeared to be stabilizing from record price highs in 2021. And the current downturn is yet another example of the continuing challenges of an uneven post-COVID economic recovery.

U.S. Hot-Rolled Coil Down 40% Since April

Boston Metal has plans to produce steel with low carbon emissions that could fully drive a decarbonized steel industry unlike current "greener" methods, CEO Tadeu Carneiro says.

China's economic activity has started to recover from the late-May COVID-19 resurgence, while the government has also been stepping up fiscal and monetary stimuli to support the recovery. However, recovery this year is likely to face a bumpy ride and remain relatively weak compared to the waves in 2020 and 2021, with the spread of the omicron variant proving more difficult to contain.

The slowdown in property sector will only further compound China's economic challenges. Expectations for any steel demand growth for the remainder of 2022 may need to be tempered.

The omicron resurgence lasts longer

China took less than two months to contain the COVID-19 outbreak in 2020 and the delta variant resurgence in 2021. But due to the highly contagious nature of the omicron variant, it took China nearly three months – from early March to early June – to control the coronavirus outbreak in 2022. And this came with a price.

China employs a dynamic zero-COVID policy toward the pandemic, which means certain social restrictions and lockdowns will be repetitively implemented in the foreseeable future to contain new waves of the virus, keeping the rate of economic and steel demand recovery slow.

China’s COVID-19 Cases

Exports of Brazilian steel products to Europe jumped 710% in the first half of 2022 to 909,828 mt, compared to 112,221 mt in H1 2021, filling the void left by regional suppliers Russia and Ukraine, according to latest data from national steel association Aço Brasil.

The export volume to Europe represented 13.4% of total Brazilian exports in January-June, compared to 2.2% in the same period of 2021, and was mainly composed of coated and uncoated flat steel products.

The supply restrictions derived from the Russia-Ukraine war also prompted Brazil to increase shipments to neighboring countries in Latin America, totaling at 2.12 million mt in H2, up 66.7% on the year. Shipments to Asia followed, totaling 174,663 mt, up 3.1% on the year, and shipments to Africa totaled 128,101 mt, up 594% on the year.

Brazilian Exports of Steel Products by Region, Jan-June

Join our metals experts, John Anton and John Mothersole, as they delve into the volatility of metals pricing in the wake of the Russian invasion of Ukraine and with the growing COVID-19 outbreak in China.

These two factors are placing immense stress on steel, copper, and aluminum markets. And while we usually hear a singular global story—this month, regions are telling their own metals pricing tales. What does this mean for buyers, manufacturers, and consumers? How high is too high?