Steel market fundamentals have weakened markedly over the second half of 2018, according to a recent OECD report entitled Steel Market Developments Q2 2019.

While steel production growth is still positive in most regions, the OECD report claims that steel prices have already started to adjust, reversing their previous upward trend and eliminating most of their earlier gains. “Important headwinds include the weakening global outlook, the increase in trade frictions, the pick-up in new capacity investments, and the persistence of excess capacity,” says the OECD.

Data suggests that steel consumption growth stalled in most economies in 2018, and that the 2017 recovery may be losing momentum. Downside risks include increased trade frictions and a weakening global economy, which claims the OECD report, suggests that without further action large structural imbalances are likely to persist.

On the export front, global steel exports continued to decline over the first 10 months of 2018 with exports from India down 29.3% and 13.4% from the USA. Steel exports from China were down 9.3% while the European Union was down 6.4% and Japan 3.1%.

Where steel and raw materials prices are concerned, the report highlights how steel prices have reversed since earlier gains during the early months of 2018, falling back to pre-2018 levels. Coking coal and ferrous scrap prices have also fallen back to pre-2018 levels, but iron ore prices have remained roughly the same over the year.

Global steelmaking capacity, in nominal crude terms, remained ‘nearly unchanged’ in 2018 following declines in 2016 and 2017, according to the OECD, and remains ‘well above production and demand’.

The OECD reports anticipates a global GDP rate of 3.5% but highlights downside risks, such as a potential increase in trade frictions, the phasing out of non-conventional monetary policies and financial risks ‘stemming from high asset valuations and high private and public indebtedness’.

For a copy of the full report, click here.