Fitch Sees N. America as Bright Spot in Gloomy 2023 Steel Outlook

Reasons cited included benefits from protectionist trade measures, government support for infrastructure spending, and cost advantages in some markets.

Additionally, US steel consumption is expected to increase.

Fitch said it sees incremental growth in steel consumption in 2023 in markets such as India, southeast Asia and the US.

In a separate note Wednesday, Fitch spoke more specifically about the US market. The ratings agency believes US Midwest hot-rolled coil prices will, on average, remain significantly lower than in the first half of 2022, although moderately above historical averages and at a relatively healthy level for domestic producers.

Overall, Fitch expects that the global steel sector will not fully recover in 2023 from the supply-demand shift in favor of end markets caused by reduced consumption in the second half of 2022.

“We expect materially lower earnings for steelmakers as the global economic slowdown has ended the period of exceptionally high prices supported by post-pandemic pent-up demand.”

Steel markets will normalize in 2023, the report said, with volumes broadly similar to 2021 levels, excluding China.

The Asian nation’s production slowdown is expected to hit global production.

“We expect global steel consumption to shrink by 60–65 million metric tons in 2022, with capacity utilization dropping from 80% to 77%,” Fitch said.

China’s targeted reduction of steel production will account for 20–30 million metric tons of this, the report said, with the rest coming from demand destruction outside China.

As for Europe, prospects for steel companies remain gloomy due to high and volatile energy costs, the looming recession, waning consumer confidence, and the greater need to redesign supply chains for the steel sector and possibly its end markets, Fitch said.

Factors affecting short-term supply and demand include issues with the Chinese property market and the timing of lockdown easing in the country, Fitch noted.

Additionally, geopolitical issues from the war in Ukraine, the US-China trade relationship or a potential escalation of China-Taiwan tensions, and evolving protectionist measures in major economies, could shift the market, the report said.

By Ethan Bernard, Ethan@SteelMarketUpdate.com