Fitch Solutions has sharply revised its global average steel price forecast for the first half of this year to $800 per tonne from $600 a tonne previously. It is forecast that global steel prices will only fall from 2022.

Market research firm Fitch Solutions (USA) has just sharply revised its forecast for global steel prices in the first half of this year to an average of $800 per tonne compared to the previous $660/ton. This is mainly due to the continued shortage of steel in the short term, thereby pushing up steel prices even higher.

International steel prices began to rise sharply since the fourth quarter of 2020 to their highest level since mid-2008. The world average steel price has now exceeded $883 per tonne, much higher than the average of $582 per tonne in 2020.

Fitch Solutions said the steel price increase is likely to enter a stable phase in the second half of the year. However, Fitch Solutions said that steel prices are unlikely to fall sharply in the near future because demand for steel remains high while supply is not keeping up.

Besides, Fitch Solutions also said the hesitation of downstream users such as construction companies, electronics manufacturers ... in the future, steel prices will increase in the near future. Besides, the steel consumption of the construction industry in China also often peaks in the summer months and then gradually declines.

Fitch Solutions forecasts that global steel prices in 2022 will fall below current levels as demand enters a period of stability and steel output increases (Photo: Reuters)

The booming demand for steel in China in the past period has caused international iron ore prices to continuously set historically high prices, partly pushing up steel prices in many parts of the world. Fitch Solutions forecasts that U.S. and European steel demand will also recover from a decline in 2020 due to the Covid-19 pandemic.

In Europe, steel producers mainly use electric arc furnace technology with input materials being scrap steel. Meanwhile, steel production in China mainly uses the high-furnace method with input materials of coke and iron ore. Fitch Solutions believes that many downstream audiences, especially major automakers and electronics manufacturers, will favor European steel in the near future toward the goal of reducing carbon emissions.

"We also forecast that the localization of steel supply chains will increase in the coming years. This will result in downstream industries in Europe using more European steel than steel from China," said Fitch Solutions. The European Union currently aims to cut emissions by 40% by 2030 and aim to build a green economy after the Covid-19 pandemic.

Fitch Solutions forecasts that global steel prices in 2022 will fall below current levels as demand enters a period of stability and steel output increases. Accordingly, the average global steel price is forecasted by the agency to reach 600 USD / ton in 2022 and reach 535 USD / ton in the period from 2023 to 2025.

"Growth in steel demand in China will slow and increased steel market protectionism globally will boost steel production in the affected countries. The combination of these two factors will help the steel market loosen and drag prices down in the medium term," said Fitch Solutions.