Industrial metals: Uncertainty on the steel markets

by David Fleschen

The strong US dollar weighed on metal prices yesterday afternoon, causing them to give back most of their initial gains and even slide into negative territory in some cases. This morning they continue to fall slightly for the most part. Copper, for example, has at times fallen back below USD 8,300 per tonne. The interim high in sentiment seems to have already disappeared. This can also be seen on the stock markets, which recorded significant losses in the USA yesterday. The weakness has spilled over into Asia, where the markets are also under pressure. The higher risk aversion of market participants is therefore not leaving metal prices unscathed, especially as weaker economic data from the USA are calling for caution.

The iron ore price has also stopped its recovery movement of the last few days and is falling slightly today. It had recently followed the movement of the rebar price on the SHFE in China. On the LME in London, on the other hand, there is hardly any recovery in the price of rebar. At around USD 690 per tonne, the price is only slightly above the multi-month low recorded at the end of last week. Since the end of April, it has fallen by 26%. The prices for hot- and cold-rolled steel in north-western Europe suffered an even greater slump during this period. According to MEPS, the strong price fluctuations - first the jump upwards in the wake of the Ukraine war, later the sharp correction - have led to great uncertainty among market participants. The panic buying initially observed has turned into buying restraint ahead of the summer season. According to MEPS, warehouses in Europe and North America are well stocked and delivery times have normalised in both regions. As there are no signs of an imminent improvement in demand, according to MEPS, steel producers may cut production or shut down capacity as they did during the Corona pandemic.

Source: Commerzbank Research, Photo: Fotolia

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