International credit ratings agency Fitch Ratings has stated in its 2018 Global Steel Outlook report that it expects the capacity closures which have already taken place in China to continue to have a positive impact on steel markets globally in the current year. These closures have seen capacity utilization rates in China rise to around 84-85 percent, which has led to higher domestic prices and greater profitability for producers. They have also resulted in lower export volumes, which have improved the market balance and domestic prices in other regional steel markets. The actual result in these markets will depend on consumption trends, but the background is positive.
Fitch expects Chinese steel demand to ease in 2018 due to the slowdown in the property market, a reduction in supply, and more rigorous enforcement of environmental protection policies. The credit ratings agency believes the overall market will be more stable in 2018 than in previous years. Fitch also expects Chinese steel prices to be moderately lower on average in 2018 amid decreased demand.
Meanwhile, in the US, Fitch expects prices to moderate in the second half of this year reflecting lower raw material costs and a modest rise in import competition. Fitch also expects solid North American steel demand supported by strong US auto and non-residential construction markets.
According to Fitch, key market indicators for the European steel industry this year are at present uniformly positive. For demand Fitch expects growth in all of the key steel-consuming sectors - construction, automotive and mechanical engineering.
The credit ratings agency forecasts demand growth of around five percent in India in 2018, driven mainly by a sustained increase in government infrastructure spending as the 2019 general election draws near.
Fitch expects that the recovery in the Russian steel industry which started in 2017 will continue through 2018 with a moderate increase in steel demand of around 2-3 percent, underpinned by its expectations of continuously slow but steady GDP growth in the current year.