“Given subdued demand, regional steel prices are likely to come under downward pressure this year. We expect prices in China to fall as supply continues to outstrip domestic and foreign demand. In the US, steelmakers plan to expand output, but we think demand will be weaker than they expect. Meanwhile, lower interest rates will only offer scant support to prices in Europe as economic growth remains weak.”
More specifically on China, Ms Bain said steel demand there was subdued in 2023 as the property sector weakened.
While Ms Bain said this demand is expected to “fare better” in 2024 “driven by a cyclical recovery and continued government stimulus” as well as resilient broader construction activity, a reckoning still lies ahead.
“The correction in the construction sector and steel demand is inevitable and is only delayed through policy support. Property activity is likely to halve by the end of the decade, with average annual falls of 10 per cent, causing similar falls in construction inputs like steel. Overall, we expect steel consumption to be flat in 2024 and fall by 0.5 per cent in 2025.”
Ms Bain said steel production in China was flat in 2023 and “we think output will be subdued on the back of the weak demand backdrop. Nevertheless, supply will outstrip domestic and foreign demand, by a fair margin, which will put downward pressure on prices.”
As for oil, Capital Economics expects an unwinding of OPEC+ supply cuts, coupled with slowing growth in global oil demand, to push the oil market into a surplus by the end of this year and for this to persist into 2025.
“Accordingly, we forecast the price of Brent crude to fall from $US89 per barrel now to $US75 per barrel by end-2024 and $US70 per barrel by end-2025.”
Capital Economics expects battery mineral prices to lag through 2024 and for them to rise in 2025 and 2026 as global electric vehicles sales increase.
As for gold’s surge this week to a record above $US2300 an ounce, Ms Bain said she’s forecasting a paring of that advance to $US2100 by end-2024, before rising again to $US2150 by the end of next year. “But the risks to our forecast are skewed firmly to the upside.”