Steel prices drop as demand forecast trims, China’s real estate crisis escalate

Steel prices have shifted into a bearish trajectory as downside risks have escalated after the market participants trimmed the demand forecasts for steel going forward. Analyst at Goldman Sachs has cut the steel demand by 5% for CY2022.

A steep cut in steel demand is backed by escalating China’s real estate crisis. Real estate has been vulnerable in China for the past year, led by a shift in spending patterns in the household after the Covid-19 pandemic. Apart from that, infrastructure spending has been slowed down sharply in China. It is worth noting that the property sector addresses one-third of steel demand in China.

The property crisis has forced steel mill owners to ditch production as higher stockpiles due to weak demand forcing them into bankruptcy. Going forward, the demand for steel will likely remain muted on escalating Sino-US tensions over Taiwan.