【6/28/2023 - What does the future hold for the steel industry? A mild recession, lower Chinese steel production and volatile energy prices, according to market analysts who spoke during the final day of the inaugural Global Steel Dynamics Forum.】
What does the future hold for the steel industry? A mild recession, lower Chinese steel production and the potential for volatile energy prices, according to market analysts who offered a few views into the future during the final day of the inaugural Global Steel Dynamics Forum
Opening the final sessions on Wednesday, Ryan Sweet, chief U.S. economist for Oxford Economics said his firm believes the global economy is likely to tip into a mild recession late this year or early next year.
“Cracks are forming,” he said, adding, “The pandemic hasn’t repealed the business cycle.”
Sweet said the global economy is expected to contract as central banks raise interest rates to fight inflation. Likely, he said, they'll overcorrect. However, recessions brought on by monetary policy errors tend to be short in duration and limited in severity, Sweet said.
Also on Wednesday, attendees heard from Lucas Pipes, managing director of B. Riley Securities and Timna Tanners, managing director and senior analyst at Wolfe Research, who agreed that Chinese steel production has already peaked.
Pipes noted that as China ended its strict COVID-19 lockdowns, there was great anticipation of a surge in building activity. But it did not materialize.
“It sputtered,” he said, adding that the expected boom didn't come despite polices meant to prop up China's property market, a key driver of demand.
In addition, Rick Preckel, a principal at pipe and tube consultancy Preston Pipe, said there’s a risk of volatile energy prices in the future.
He said that going forward, fossil fuels will still provide much of the world's energy, more than 30% or 40%, depending on the estimate. However, in the U.S., government policy is discouraging fossil fuel investment at a time when oil and gas exploration and production companies are prioritizing shareholder returns over new wells.
"With the path we're on today there's a possibility we're going to see very volatile energy prices in the future," he said.
The 2024 Global Steel Dynamics Forum will return New York City in mid-June. A date will be announced soon.
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