Moderate Steel Demand Growth in North America and Europe
Fitch Ratings forecasts modest growth in steel demand in both North America and Europe in 2025, supported by infrastructure investments and government spending programs such as the U.S. Infrastructure Bill, CHIPS Act, and Inflation Reduction Act. Despite these positive signs, the credit agency notes that the steel sector may still face challenges due to the potential impact of lower raw material costs. This could reduce margins for steel producers, despite their strategic investments in higher-margin production and increased capacity aimed at meeting growing demand. In particular, the U.S. market is expected to see a slight increase in steel demand, driven by infrastructure spending, although the steel prices may remain relatively low.
China’s Steel Market Faces Stability with Slower Growth
Steel demand in China is expected to remain stable, with little to no growth in 2025. Fitch attributes this to ongoing contraction in the property sector, but points out that manufacturing and infrastructure projects should provide some support. However, the general trend in China’s steel production is expected to decline in the low single digits as producers adopt a more disciplined approach to production. While this may stabilize the market, high export levels from China over the past few years have disrupted markets in countries like Brazil, Turkey, and India, which could continue to impact international trade dynamics.
India: A Key Growth Market for Steel and Ferrous Scrap
India is expected to remain a significant growth market for steel, with Fitch projecting a 12% increase in steel consumption in fiscal year 2026, driven by strong public and private sector spending. This growth represents a continued opportunity for steel recyclers, particularly as India gradually shifts to electric arc furnace (EAF) production. The increasing adoption of more environmentally friendly technologies is a response to global pressure for lower-carbon steel production. This transition could be particularly beneficial for recyclers, as demand for scrap steel is expected to rise, especially for markets like the European Union, which are focusing on carbon-efficient steelmaking.
European Steel Market: Modest Recovery Expected
Europe’s steel market faces a slow recovery. Real steel demand has been on a downward trend since 2017, with a slight recovery following the COVID-19 pandemic in 2021. Fitch expects a modest 0.6% recovery in 2025, supported by manufacturing growth and a rebound in construction, aided by improved financing conditions. However, steelmakers in Europe continue to struggle with weak demand from key sectors such as construction and automotive, compounded by high energy prices. As a result, steel production in Europe will remain subdued, affecting the competitiveness of European steel in the global market.
Challenges for Steel Recyclers and Pricing Pressure
For steel recyclers globally, 2025 could present both opportunities and challenges. While there is a growth outlook in key markets like India, pricing pressure due to lower raw material costs could affect margins. The steel recycling industry, already facing difficult conditions in 2024, may experience further declines in the value of scrap steel, especially if raw material costs continue to drop. The shift towards more sustainable steelmaking, including the increased adoption of electric arc furnaces, may provide long-term opportunities for recyclers, but the immediate outlook for pricing remains uncertain.
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