There has been much market chatter recently about the “recovery” in global steel prices. Are we indeed witnessing a transitional phase in Chinese steel demand, from it being a negative influence to a positive force on prices?
Looking at MBR’s aggregate global steel price index, there is some evidence to support the belief that global prices move in the same direction as Chinese prices (see graph).
We accept that the magnitudes of the price changes in China and the rest of the world have diverged, as Chinese demand has underperformed the rest of the global market since 2013. However, MBR remains convinced that the market outside China has yet to become immune to the influence exerted by Chinese fundamentals.
The slack nature of Chinese market fundamentals resulted in the dramatic growth in the country’s steel exports that began in 2014.
As illustrated by the graph below, the year-on-year increase of nearly 35 million tonnes...