The world’s major countries have reduced liquidity supply and raised interest rates, and due to the impact of the severe epidemic and the Russian-Ukrainian war, global economic growth and steel demand are bound to be suppressed to a certain extent. Not long ago, the International Monetary Fund (IMF) released the “World Economic Outlook”, predicting that the real growth rate of the global economy in 2022 will be 4.4%, down 0.5 percentage points from the forecast in October last year. The United Nations Conference on Trade and Development lowered its forecast for global economic growth in 2022 to 2.6% from 3.6%. The decline in macroeconomic growth will of course lead to a decline in the growth rate of total steel demand. The decline in the growth rate of total overseas steel demand is bound to restrain China’s steel exports, mainly direct exports.
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The significant difference between Chinese and foreign monetary policies will have an impact on the RMB exchange rate, which in turn will affect China’s steel production and import and export costs.
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On the one hand, the Fed’s gradual withdrawal of monetary quantitative easing, and the continuous interest rate hikes and expectations of interest rate hikes will prompt the return of some US dollars, causing the US dollar exchange rate to rise. On the other hand, the monetary policy of the People’s Bank of China tends to be loose, especially the interest rate cut and interest rate cut expectations in the future, which may lead to a temporary depreciation of the RMB. The short-term depreciation of the RMB will naturally increase the import cost of smelting raw materials in US dollars. In this way, the import cost of China’s steel smelting raw materials will increase, and at the same time, the export cost of China’s steel will be correspondingly reduced, including its direct export and indirect export.
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