Monday, 6 March 2017

Factors that will influence the Steel Market in 2017

FY2016 witnessed a lot of ups & downs in the steel market, right from China being slammed with protection duties from various nations to developing nations increasing their production capacities to meet the new infrastructure demand. Let us now see what this New Year brings and which crucial factors shall influence the international steel market.

Demonetization in India:  Demonetization was implemented in November’16 in and its shock waves can still be felt in the market.  From being a corrective measure, demonetization has turned out to be a crisis for the market.
This year the effects will certainly guide the Indian Steel Industry. And the Industry has been definitely affected in almost every area right from sales & purchases to logistics & production. This situation is expected to drag in to the first quarter of FY18 before normalising. Industry experts are of the opinion that the overall steel consumption will decline due to the degraded purchasing power. 



Steel from China: In early 2016, China made promises of cuts in steel production capacities, reduced coal mining and tightened environmental norms to reduce it outgrowing steel production after facing protective measures against its steel exports from nations like Inida, Europe, USA and others. But figuratively, the drop from FY15 to FY16 is a mere 0.8 % in exports. Experts are predicting that even in 2017, exports from China are not expected to take a step back either and cheap Chinese steel exports will further pressurise the global steel prices and markets.


The FTA Conundrum: Further strengthening relationship with neighbours could cost India a domestic discontent in the steel market. India is committed to reduce import duty from Korea to nil by this year under CEPA (Comprehensive Economic Partnership Agreement) and under similar agreement import duty on steel from Japan is reduced to 0.8%. This has led to a rise in imports from these two nations which has significantly increased from 23% during 2009-10 to 43% in 2015-16.

Trump comes to Power: The world is getting used to the fact that Donald Trump is the President of United States. The US steel industry was highlighted by Trump in his election campaigns where he has promised to bring back the heyday of American steel Industry by implying stricter import policies and promoting use of domestic steel, which got everybody shifting in their seats. But while he has been aggressively advocating domestic steel in construction he has been known to use international steel to build his empire.  So while experts are speculating that US of A will cut down its steel imports, experienced steel players say otherwise.



Budding Scrap Destinations: The South East Asian countries are gaining popularity as hub for ferrous scrap metal. The ferrous imports from these nations have significantly increased over the decade. These nations are a promising ground for recycling and getting recycled steel back into the markets via exports. 


Pollution Concern:  Developing nations like India & China are facing air pollution which has reached hazardous levels. And since building infrastructure and construction requires a lot of energy from fossil resources. Coal burning is one of the main issues of the population level in these nations. If the governing bodies try to keep a tab on construction or infrastructure projects which are contributors to air pollution the steel industry might witness a drop in the demand of steel from these nations.

  
All these factors are going to be deciding factors for the steel prices and trends in the international steel market.



Bibliography:
Steel 360 Magazine, January Issue

Lawder, D. (2016, December 13). Trump packs trade team with veterans of steel wars with China (Reuters, Ed.). Retrieved February 17, 2017, from http://www.reuters.com/article/us-usa-trump-china-trade-analysis-idUSKBN13Y2FI

Fastner Fixing Magazine. (2017, January 23). Material trends 2017 – steel. Retrieved February 17, 2017, from http://www.fastenerandfixing.com/news/material-trends-2017-steel

Frutos, Rahul de. (2017, January 3). Steel Prices Could Surge in 2017 as China Tackles Pollution. Retrieved February 17, 2017, from http://agmetalminer.com/2017/01/03/steel-prices-could-surge-in-2017-as-china-tackles-pollution/

Reuters. (2016, November 22). China: To fight air pollution, steel city orders closing of more plants. Retrieved February 17, 2017, from http://indianexpress.com/article/world/world-news/china-to-fight-air-pollution-steel-city-orders-closing-of-more-plants-4389668/

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