Steel production falls sharply in America
Shares of major US steelmakers have sunk roughly by more than 20%. Moreover, Latin America saw its production of crude steel fall in December by 12% compared to the same month of 2018. Brazil was primarily responsible for this figure with a production breakdown by 56%, followed by Mexico, by 30%.
Coronavirus has one of the significant effects on the metal production decline
The deadly respiratory virus has taken a heavy toll on most products, and steel is no exception. China is the world’s biggest consumer of commodities, and the slowdown in demand has affected the production very much. Chinese consumption of the metal reached its lowest in 3 years (3 598Mt).
Coronavirus fears have startled global stock markets, as investors worry over the impact of the outbreak on global economic growth. Worries over a sharp climb in new coronavirus cases in South Korea, Italy, and West Asia, have caused sell-offs across stock markets around the world. They have concerns over a more significant economic impact from the contagion. The effects of demand slowdown across substantial markets, weaker steel prices, and the damaging effects of the trade war in 2019, influenced the steel industry.
World Trade Organization (WTO) warned the future perspective is uncertain from the coronavirus epidemic that could affect world trade. Latin America suffers from a process of economic reduction that weighs on the development of the industry and affects its productivity.
Other factors that shocked the metal industry
US steel stocks had been out of favor for most of 2019. Except for AK Steel, all other major American steel makers underperformed the broader market last year, with US Steel being the worst performer.
The slump in domestic steel prices has been the significant headwind faced by US steelmakers in 2019. The Trump administration’s imposition of 25% of the metal tariffs provided a great advantage to American steelmakers last year and drove their earnings. However, after an initial tariff-induced rally, US steel prices had been on a downturn. The prices were down for much of 2019.
The global economic downswing and softer steel demand are other crucial factors for the decline in prices. A slowdown in China’s economy amid prolonged trade tensions with the United States triggered a drop in steel demand. Slow automotive and construction sectors also hurt the metal demand in Europe. In the meantime, weakness in automotive hit the market in the United States.
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