UBS Analysts Report Global Steel Production Decline in August 2023 - China Hit Hard with 13% Drop
In a recent note dated Tuesday, analysts from UBS revealed a significant setback in the global steel production landscape, with output declining by 7% year-over-year. The most notable decline was seen in China, where production plummeted by 13% year-over-year.
This drop in production is indicative of weakening demand across the sector, leading steel producers to take more downtime than usual due to negative profit margins. However, outside of China, steel production actually saw a slight rise of 2% year-over-year in regions like the European Union, the UK, and South America.
On the other hand, North America experienced a decrease in production compared to the previous year. Global steel utilization also fell by 5 percentage points from the previous month, reaching about 70% in August.
Price trends in the steel market vary across regions, with China and the United States seeing price increases for hot-rolled coils, while the European market is facing challenges with falling prices. Despite pricing difficulties, raw material costs have been decreasing.
Looking ahead, UBS analysts identify several factors that could influence the steel market, including potential boosts in demand and pricing in 2025 due to falling interest rates and increased federal spending.
UBS recommends several companies in the steel sector for investment, with buy ratings on companies like ArcelorMittal, SSAB, JFE Holdings, and more. However, the sector also faces risks such as unpredictable steel prices and global trade restrictions.
In conclusion, the steel industry's performance is subject to various external factors, making it a potentially lucrative but risky investment opportunity for those looking to enter the market.