The worldwide supply/demand imbalance for steel will return in 2022 and steel prices will gradually decline toward their historical averages from the unusual highs of this year, says Moody´s Investors Service in a new report.
The report indicates that steel demand will ebb as buyers replenish inventories, stimulus spending wanes and consumers return more widely to spending on experiences, as vaccinations become more widespread.
Moreover, steel supplies will continue to increase, with productivity improving and new capacity coming online in certain parts of the world.
The report indicates that steel prices will ease from this year’s highs in 2022, but will remain historically strong.
Operating performance and free cash flow is expected to improve considerably for steel producers globally through at least mid-2022 based on their significant higher volumes and solid prices.
Steel prices will settle higher than their historical levels in 2021 to 2022 as demand increases for scrap and metallics, and as the steel sector’s competitive dynamics improve with consolidation in some regions.
The report indicates that US steel prices will materially decline in 2022 from the peaks this year before settling at historically strong levels amid consolidation, fiscal stimulus and beneficial monetary policy, and decarbonisation efforts.
Demand for steel will remain strong in China through mid- to late 2022, with automotive and infrastructure construction demand partially offsetting cooling demand from property.
Steel prices in Europe will narrow through 2022, but will still exceed historical averages by some 18% over 2023 to 2024.
Steel demand in Brazil will decelerate in 2022 from 2020 and 2021 levels, but construction and industrial activity will remain firm enough to support prices.
Indian steelmakers are expected to benefit from strong domestic demand, supporting high prices until supply catches up.
Growing demand will also support Korean steelmakers’ profit margins, the report indicates.
Higher prices will boost earnings for Japanese steelmakers, but secular decline will persist.
Russian premiums for domestic steel are fading as demand dissipates and export duties proceed.