Fitch Ratings sees reasons for steel optimism in 2025

New York-based credit ratings agency Fitch Ratings forecasts modest growth in steel output in demand in both North America and Europe in 2025.

The company and its Director of Metals and Mining Yulia Buchneva have issued a nine-page "Global Steel Outlook Report" that predicts an overall increase in the demand for steel in North America in 2025 compared with this year, but contains a sentence that scrap processors may find discouraging.

“Fitch believes lower raw material costs in 2025 and companies’ strategic investments aimed at expanding higher margin value-added production and additional new low-cost capacity to meet demand will provide some margin support,” the report says.

Buchneva opens the report by referring to the scale of output in China and the accompanying weakness in demand to absorb that production in 2024.

“High exports from China have disrupted markets like Brazil, Turkey and India since 2023,” she writes.

The new year could play out differently, according to Fitch.

“We expect almost flat steel demand in China in 2025 as manufacturing and infrastructure will drive demand while property contraction will be less severe than before,” the report says. “Producers will be more disciplined, so output will remain restricted and continue declining by low single digits in 2024 and 2025.”

Of interest to steel recyclers in North America and Europe, Fitch Ratings identifies the steel sector in India as a continuing bright spot.

“India remains the major growth market for steel and should demonstrate high production increases and better margins,” write Buchneva and fellow analysts Laura Zhai, William Van Meerbeke and Zhang Weimin. “We expect India’s steel consumption to grow by 12 percent in fiscal year 2026, driven by healthy public and private sector spending.”

India’s 2026 fiscal year runs from April 1, 2025, to March 31, 2026.

Of direct interest to metals recyclers, the report notes, “Blast furnace-based capacity remains a key steelmaking route for major producers in India. However, the share of more environment-friendly electric arc furnace (EAF) capacities should slowly increase. Major steelmakers aim to tap the demand for more carbon-efficient steel driven by markets such as the European Union.”

Steel producers and recyclers in Europe could use a prominent rebound year in 2025, but Fitch Ratings and its sources predict a more modest recovery.

“Real steel demand in the EU has been decreasing since 2017, except for a post-Covid recovery in 2021,” writes Fitch, adding that demand for steel fell by 1.4 percent in 2023 and Brussels-based steel trade association Eurofer forecasts a 3 percent decline in 2024 because of weak demand from the construction and automotive sectors and energy prices that have made European steel less competitive.

Eurofer expects a modest 0.6 percent recovery in 2025, supported by manufacturing, a rebound in construction due to eased financing conditions and wider pent up demand.

The Fitch Ratings report section on North America includes its reference to lower raw materials costs in 2025, which may cause steel recyclers around the world to ask whether their products can drop further in value next year after a consistently disappointing 2024.

Although President Joe Biden will be replaced in the White House on Jan. 20, federal funding initiatives started during his administration will continue to have in impact on steel demand in 2025, according to Fitch.

Fitch expects steel demand in the U.S. to improve by the low single digits  in 2025, supported by infrastructure bill, CHIPS Act and Inflation Reduction Act spending.

“We expect an improved demand environment combined with generally lower prices,” the report says.