The steel industry is simultaneously a driver of international commerce and a captive of global affairs. Its essential role in everyday life safeguards it against most economic downturns. But it is not impervious to the tectonic shifts in world order. At present there is a perfect storm of geo-political and economic dangers brewing, any combination of which could cause major disruption to the steel industry. First, the Australian Government´s advice to its citizens in Lebanon to leave the country immediately implies that the Israeli-Palestinian conflict is about to gravely escalate. The UK and US governments´ same advice to their citizens in Lebanon confirms the view. An all-out war in the Middle East would serve no-one´s best purpose. Already, the disruption to shipping in the Red Sea has caused freight charges to rise sharply and delivery times to lengthen. As witnessed during the pandemic, chaos in the steel supply chain can wipe out businesses further on down the line. Regrettably, if things flare up in the Middle East,

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there´s also a strong likelihood that Vladimir Putin would crank up his offensive in Ukraine – knowing that the West and America in particular will have their attention and main resources directed elsewhere. The economic impact on an under-performing Europe would be significant. This comes at a time when Europe itself is about to install a barrier to trade – the Carbon Border Adjustment Mechanism (CBAM) – where a carbon levy will be applied to certain iron, steel and aluminium product imports from January 2026, thus unsettling trade flows and price offers. Within Europe, the recent French elections produced an unhelpful political stalemate. Analysts have warned that large steel-consuming infrastructure projects will be put on hold and new investment halted until a coalition government is formed. That said, steel producers and sellers were already anticipating a summer of extended maintenance shutdowns due to continued low demand. Some projects have also been halted during the Paris Olympics. Many steel sector participants now fear their wait for a market recovery may be prolonged. In the UK, the new Labour government has said it intends to invest three billion pounds to modernise and rebuild the nation’s steel industry. It also wants 1.5 million new homes to be built over the next five years. However, steel suppliers to the oil and gas industry have expressed concerns that the UK’s new government is considering a ban on new North Sea drilling licences.  

Next, China´s slowing economy is already affecting world steel supplies and any further slowdown would exacerbate matters. The extended downturn in China´s domestic housing and infrastructure industries has caused it to dramatically increase its steel exports, thus forcing many of its overseas competitors into a non-profitable struggle for market share. Furthermore, after decades of growth at greater than 10%, China is now barely hanging on to 5% growth and some experts forecast a deceleration to 3.3% by 2029. China makes almost 60% of the world´s steel and is also the world´s second largest economy; so, 3.3% growth is a bad place to be. A recent round of government-backed fiscal stimuli in China failed to kick-start any resurgence in activity.

Donald Trump is another danger. If re-elected in November, he will reassert his “America First – America Only” tariff-based style of commerce. Whilst attractive to his political followers, this combative approach would not only unsettle the smooth supply of products but could also add to inflation. Similarly, his reckless diplomacy would return: threatening to leave NATO, ignoring world conflicts that don´t interest him, or shutting America´s borders to certain races and religions. When a nation´s success was built in large part by the hard work of multi-ethnic immigrants, to turn one´s back on such a resource seems unwise.

Even if none of the aforementioned dangers to the international steel industry materialise, there are already numerous lesser perils at play. Among them is the iron ore portside stockpile at Qingdao which has accumulated to its highest level in more than two years. Qingdao is China´s largest seaport handling the most iron ore imports. The growing inventory stems from lower steel demand prompted by China´s residential property slump, now in its third year. Accordingly, iron ore prices have fallen from their high in January – thus affecting Australia´s iron ore producers and the Australian Government´s tax receipts. Clearly, we live in an interconnected world: presently at risk.