(HSV VIETNAM GROUP) – As sources predicted, US long steel product prices were stable and increased slightly over the past month despite the negative impact of winter weather on construction activities. But that impact is only temporary and the market may soon see its usual growth in the first quarter.
Several factors may support that. While the impact of the recently passed legislation on the construction and manufacturing sectors has been limited so far, that activity is expected to pick up during the year, especially as the Federal Reserve begins to reduce interest rates. However, with the American Institute of Architects' Architectural Billing Index still down at 45.4 points in December, it's unclear how many new nonresidential construction projects will be added to the pipeline.
Scrap market prices will face pressure in the near future
In the scrap market, there is widespread prediction that 2025 will be the year scrap prices increase moderately compared to 2024, which is largely driven by an expected recovery in electric arc furnace (EAF) output across most of the globe. However, in the near term, global prices are expected to face pressure partly due to fragile downstream steel demand, limiting the potential for price increases and scrap demand.
In the US scrap market, prices are expected to cool down in the near future. Meanwhile, in Europe, it is predicted that iron scrap prices will continue to weaken in the near future in the context of slowing down downstream steel demand indicators, especially in the output of the construction industry.
However, scrap prices are not expected to decline amid crude steel production in the EU and Türkiye expected to recover slightly this year. Furthermore, in the medium term, while reconstruction activity in Türkiye slows after last year's earthquake, some construction is likely to start this year, which will feed some steel demand and, thus, boost scrap requirements.
In India, demand is currently facing some pressure as the spread between steel and scrap narrows amid a slowdown in construction activity, putting pressure on steelmaker margins. The difference between domestic rebar and imported HMS #1&2 (80:20) scrap was 142 USD/ton at the end of February, much lower than the long-term average for the period 2015-2023 of 174 USD. This should help reduce India's scrap demand in the near term and could encourage consumers to switch to lower-priced domestically produced direct virgin iron (DRI), assessed at $333/tonne ex-works at end-February, $47/tonne lower than HMS 1&2 (80:20).
A recovery in aluminum prices is expected by the end of 2024
Aluminum prices have been trading within a range recently, with losses since October in an attempt to stabilize. Initially, optimism about China's economic recovery led to overvaluation of the country's stimulus measures, but disappointment in its effectiveness turned sentiment to pessimism, weighing on base metal prices.
However, there is a belief that markets are currently underestimating China's potential for pro-growth policies, which could cause a scramble if the economy strengthens. Our base metals outlook shows gradual stabilization in the final months of the year, with expectations of a more favorable macroeconomic environment as China's recovery accelerates, likely to positively influence base metals prices. While there may be further downward pressure on prices, lower values are expected to attract discount buyers, depending on evidence of further buying to justify a positive year-end outlook.
Macroeconomic outlook is slow
The 2024 macroeconomic outlook is likely to be characterized by a general slowdown, as it is unlikely to be a year of solid growth for global economies. There are three main factors that influence purchasing decisions.
High inflation will impact consumer demand and play an important role in the North American and European economies, while China's consumer behavior will also be important as it supplies many of the goods consumed globally.
The importance of renewable energy and electric transportation in the global economy, amid geopolitical risks and the potential positive impact of interest rate cuts on consumer spending.
India's expansion potential in the global economy, especially in maritime transport, shows significant growth potential.
Ha Diem HSV