Metal prices are in bear territory for next few weeks amid lower-than-expected demand

In the past few weeks, metal prices have been showing bearish movement. HRC is trending downward, and nickel is under extensive bearish pressure, with prices falling by more than 20% in the first three months of 2023. Experts predict that the sector will remain volatile.

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Hot rolled coil prices have fallen back to March levels, while cold rolled coil and hot dipped galvanized prices have dropped even more sharply month over month. In total, HRC prices have dropped 13% from their peak on April 14, and many metal fabricators and manufacturers expect the trend to continue.

As of April, the steel demand in China declined by 3.4% in comparison to positive growth of 8.7% in March. This led to a significant decrease of almost 17% in steel rebar futures since late March. Unfortunately, any potential recovery for this market is not expected to occur for several months as China enters its slow summer production months. The slowdown in production will have a significant impact on metal prices.

The Caixin PMIs highlight that China's factory sector is struggling to maintain momentum, causing the base metals market to decline. Despite this, sectors such as grid investment are supporting copper and aluminum prices. However, the weakness in China's property sector, which has been a significant driver of metals demand for years, cannot be offset by these sectors.

Moreover, the London Metal Exchange (LME) index of base metals has plummeted from a high of 4,356 in January to 3,704. Nevertheless, strong green demand channels and low visible inventories have prevented prices from dropping even further.

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According to Procurement Resource, the prices of metals in the HRC markets are showing signs of decreased optimism, with nickel prices breaking short-term support levels that may result in a continued long-term downtrend. The industrial metal market heavily relies on China's traditional economic factors, and any potential increase in demand will depend on improvements in China's economic activity and infrastructure spending.