Global steel prices are expected to decline in the second half of current calender year, after an upward rally during January-June, on account of decline in demand in the world's largest consumer, China.
However, BMI Research, a Fitch Group firm, said 2017 will usher in good news for the market with steel prices edging up higher.
"We expect the January-June 2016 steel rally to fade and prices to head lower in the latter half of 2016 as declining Chinese steel demand growth, stemming from a slowdown of the country's construction activity, will result in an oversupplied market," the firm said in its latest report.
It expects prices for the metal to trade in the range of USD 450-520 per tonne during the second half of 2016 with the average price for the entire year coming to USD 480 a tonne.
"Over first half of 2016, steel prices rallied due to a combination of high demand from Chinese steel users restocking the metal, government stimulus measures implemented in the housing market and positive investor sentiment," BMI research said.
On the outlook for 2017, the company said: "Although we forecast the January-June 2016 steel price rally to fade over the latter half, prices will gradually edge higher from 2017 onwards, due to Chinese supply moderation." It added that global steel market will see a surplus of 2 million tonnes (MT) in 2016, a decrease from a 2015 surplus of 12.2 MT.
From 2017 onwards, the global steel market will tighten and shift into deficit, decreasing the stocks-to-use ratio from 13.6 percent in 2016 to 11.6 percent by 2020.
"Despite this, prices will remain subdued by historical standards. For instance, our 2016-2020 average of USD 518 per tonne is significantly lower than the annual average of USD 667 a tonne during 2011-2015," it added.
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