A blow to cargo ships is the sharp decline in steel demand from China

Her Anastasia Vamvaka

China’s steep decline in steel demand and falling metal prices put capesize ship owners at risk.

China, the world’s largest steel market, has seen a sharp sell-off in the last 10 days, and steelmakers are increasingly trying to idle steel plants as their profit margins fall, with steel prices falling to 2020 levels. .

China’s steel production has largely surpassed local manufacturing activity, something that is only now being recorded in metal prices.

Iron ore prices fell again today and have now recorded their biggest weekly drop since mid-February.

At China’s steel hub, Tangshan City, 56 of the 126 blast furnaces have been shut down for maintenance, according to Sinosteel, as factories struggle to cope with falling profit margins amid weak steel demand and high stocks.

However, it is important to note that this time of year in China has a longer period of closing blast furnaces due to the weather.

Mysteel Research & Consulting expects steel prices in China to fall as it enters a period of weak demand amid high temperatures and heavy rainfall. Most steelworks are scheduled for maintenance in late June and early July.

Extreme lockdowns have hampered economic activity throughout China this spring. Data from S&P Global Commodity Insights, for example, show that crude steel consumption in China fell 14% in May from a year earlier.

As a result, stock levels are 12% higher than last year according to CRU Group data and may be needed by August to fall to the median levels of the last five years.

According to new estimates, steel demand in China over the next two years is expected to grow to less than a quarter of the rate for the rest of the world, according to a recent dry volume report by BIMCO. At the same time, the downturn in China’s housing market is having a profound effect on future earnings.

China’s demand for steel has created great wealth throughout this century. However, this seems to be changing.