Steel signals an upcoming industrial crisis

Steel prices, both in China and in the US, are marking a rather significant reduction due, possibly, to the destruction of ongoing demand. Steel is an essential alloy in industrial production and a decline in its demand, therefore in prices, is strongly indicative of a sharply contracting industrial situation.

Let's see the prices in China:

One year

The very strong peak in September prices and the secondary peak in April seem to have passed as prices retreat. We are not too far from 2018 prices, should the decline continue:

A similar phenomenon is taking place on Nimex futures prices. here at one year:

Here, too, the price begins to get closer to those of 2018

While the difference is still noticeable, however, the trend seems towards a realignment. But there is a big problem: production prices are not those of 2018, especially from the point of view of energy costs. If steel prices drop and almost reach 2018, it means that the level of demand is much lower.

It is useless to list the uses of steel. If prices fall it is because the rise in steel and energy prices in general is "destroying demand". That is, stagflation is creating the conditions for achieving a new equilibrium at a higher price, but with a much lower overall level of production.

This drop in price indicates an industrial system that is wrapping up. It is not yet possible to say how profound the problem is, but surely there is something wrong.

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The article Steel signals an upcoming industrial crisis comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/lacciaio-segnala-un-crisi-industriale-in-arrivo/ on Mon, 23 May 2022 12:00:42 +0000.