Asian ferrous steel and scrap prices are expected to rise in the fourth quarter of 2024, supported by Beijing's economic stimulus, stronger demand and supply disruptions. But softer demand in Taiwan and South Korea could put a lid on positive sentiment.
The Chinese domestic steel market has been on an uptrend since the end of September after the People's Bank of China (PBOC) announced measures to support the property market, leading to a rebound in seaborne steel prices.
Higher Chinese steel prices also improved margins for overseas steelmakers, as the downward pressure from cheap Chinese steel products weakened, with the Argus cfr Asean billet assessment rising to $490/t on 10 October, from the year-to-date low of $445/t in the week ended September 5. China's ferrous sector is expected to remain strong in the fourth quarter of this year, as Beijing announced more fiscal stimulus to boost its economy on 12 October, and this is likely to boost investors' confidence and spur buying interest during the year-end restocking period from downstream buyers, trade sources said.
In east Asia, Vietnamese steelmakers anticipate a firmer domestic steel market in the fourth quarter, following a challenging first nine months, marked by weaker demand and increased competition from Chinese products. But prices started to rebound at the end of September with the Chinese steel market bottoming out. Many Vietnamese buyers of hot-rolled coil (HRC) have also shifted towards local products since Vietnam initiated an anti-dumping investigation at the end of July into HRC imports from China and India. Many market participants expect a positive shift in HRC and construction steel prices from the fourth quarter onwards, as pressure from Chinese imports eases.
Vietnam's steel demand is also set to benefit from increased public investment spending. With the country's prime minister, on 8 October, calling on authorities to speed up the disbursement of public investment in the remaining months of the year to stimulate economic growth, Vietnamese buyers have become more active in the seaborne scrap market as the steel market improves. A Vietnamese mill secured the winning bid for H2 scrap in the October Japanese Kanto tender on 9 October at ¥45,680/t (305.70/t) cfr, up ¥2,960/t from September's tender.
Prices could find further support owing to a possible reduction in supply, as scrap generation in the US, the biggest scrap supplier globally, typically declines in the fourth quarter. There is a likelihood of disruptions to scrap collection and transportation owing to logistical challenges arising from the colder weather, which also slows down construction and industrial activity, particularly in northern regions. "Usually, buyers understand that the year-end festivities will result in slower scrap generation, so some buyers who are not purchasing every week will tend to seek more cargoes before that," a trader said.
But the market in other regions like South Korea and Taiwan in Asia could lack momentum to support rising optimism. There are many uncertainties on the outlook of scrap prices, given the weight limits imposed on highway trucks that came into effect on 1 October, Taiwanese scrap buyers said. They added that catering for additional trucks to prevent overloading would be an added operational cost, which would affect their margins. Taiwan's cumulative automobile sales stood at around 344,000 units in the first three quarters of this year, marking a slight decrease of 1.6pc on the year. But demand for automobile steel is still deemed to be relatively high, China Steel Corporation — the biggest steel mill in Taiwan— said on 16 October, adding that the fourth quarter is usually a peak season for the steel industry, which may help support steel prices.
In South Korea, with poor domestic steel demand continuing to weigh on the nation's steelmaking capacity, steel production fell over January-August. The sixth biggest steelmaker produced 42.5mn tons over January-August, marking the biggest year-on-year decline of 5.5pc among the top ten steel-producing countries this year.
The World Steel Association has revised its forecast for world steel demand to 1.75bn tons in 2024, down by 0.9pc on the year, from a year-on-year increase of 1.7pc to 1.79bn previously.
