Edward Blomstedt and Mika Mantere

Combi Works insights – market development during H2 2022


We want to write a short update about the market movements. A few months have passed since the previous report, which you can read here.

Since our main manufacturing markets are in Europe, China, and India, I will focus on their development. Some months ago, we wrote about the implications of Russia’s war on Ukraine and please refer to that to refresh your memory here for the previous report.

Raw material and energy market development

The market turbulence in the past months has been two-sided. The continued war and approaching winter are causing energy market reactions that are putting a strain on consumers but equally on industry. As an example, ArcelorMittal has signaled a closure of two steel plants in Germany, citing high energy prices as the reason. Similar signals have been heard from other industries, although the overall industry and economic performance in Europe has been good over 2022.

The steel prices in Europe have continued on a downwards trajectory and this may also be one underlying reason why steel producers are closing down plants to protect the market prices.


Europe has managed to find alternative sources of materials and tackled the material shortfalls. All over Europe, wholesalers stocked up on material with higher cost earlier in 2022, as the normal supply of steel to Europe was heavily disrupted by the war in Ukraine. Countries that were more dependent on Russian and Ukrainian steel, such as the Baltic and East European countries, had perhaps the biggest impact in prices when forced to quickly find alternative sources of raw material. With global steel prices decreasing, also European prices are coming down. As the prices now vary across Europe, the countries that have cheaper prices now likely have bigger consumption and have been able to consume the high price steel from the stocks, whereas the countries with higher price are still selling a larger share of high priced steel from their stocks. The market prices around Europe are however varying greatly with reports from some Eastern European countries showing steel prices at 1,2-1,3 eur/kg whereas other countries that have been more heavily dependent on Russian or Ukrainian steel are still showing prices of around 1,5 eur/kg. Such big differences are usually not common on the EU market but sources we have interviewed are speculating that particularly in the Baltics wholesalers reacted to the impacts of the war by increasing stocks and are now therefore still partially selling of material bought at higher cost. With the rising energy prices and with the closedown of some steel plants in Europe, steel prices could risk turning back upwards over the winter months.

Energy prices are now causing disturbances as the abrupt stop in gas supplies through pipelines from Russia to Europe has caused gas price hikes of over 100% in particular in Germany y-o-y in August, according to CNBC. Even as the government seeks methods to subsidize consumers and industry, it will inevitably affect the overall competitiveness and economic outlook.

Turkey has doubled its oil purchases from Russia in 2022, following the EU sanctions according to Reuters. China has also looked to buy some of the surplus Russian oil and gas and Russia has become the largest single exporter of oil to China. However, China has a policy not to rely on a single source which is partly preventing Russia from exporting the amounts lost in European demand. India has also been taking up alot of the Russian spill over but as the market is trending towards a recession OPEC+ already reacted by curbing some of its output to prevent oil prices for further falling.

Just as the raw material prices are subsiding, factories are struggling with high energy prices and uncertainty over the winter months. The inflation is causing labor costs to rise, more on this later in the report.


China is gathering for its 20th National Congress of the Communist Party of China (CPC) in mid-October and is expected to paint a rosy picture for its future growth. Its export economy has been strong in 2022 and China’s exports showed double-digit growth in August. China’s GDP growth rate is expected to reach 3 percent in the third quarter along with the easing of strict anti-COVID-19 measures and the effect of policy support.

The Chinese economy does however face downward pressure, both from COVID-19 outbreaks and weakening external demand. There are however signs that China’s economic fundamentals may be slowing down despite reasonably strong numbers. The industrial structure has continued to change amid the steady economic recovery after the pandemic.

China’s CPI rose by 2.5% in August. The relatively stable CPI is in contrast to the high inflation in major economies around the world, has enabled China to maintain favorable conditions for production prices to remain generally stable.

Chinese exports of machinery products grew by nearly 10% year-on-year to 8.75 trillion RMB (1.26 trillion USD) in the first eight months, while exports of labor-intensive products jumped 14.1 percent to 2.81 trillion RMB (404 Bn USD). The exports still remain resilient. The fast growth in the country’s exports of machinery reflects the stability of China’s industry as well as the comparison to high inflation in the EU and the US. The trade with the EU grew by 9,5% y-o-y.

The steel prices in China have been steadily declining and indexes have already reached pre-Covid levels.

China’s energy prices have started climbing in September and its remains to be seen if it continues to climb as in Europe as it remains on slightly higher levels that before the Russian war.


India has sought to restrict inflation by buying up more Russian oil and surely other raw materials as well where European markets have sanctioned Russia.

Indian retail inflation reached 7% in August creating pressure to counter this by the government. The energy prices have however been rather stable, which distinguishes India from the rest of the world. Despite India been heavily dependent on imported energy and all energy prices increasing globally. The Indian government has managed to secure large quantities of crude oil from Russia with discount, which has kept the price of energy rather stable in Indian market. It has however slowed down India’s transition to renewable energy, keeping India still dependent on imported fossil fuels. Pig iron prices have been slowly reducing over summer.

Indian industrial output growth slowed to a four-month low of 2,4%. Indian steel prices have come down to 800-950USD/ton.

Transport & sea freight

Since the last report, VLSFO (fuel) has come down to pre-war levels. This is however not yet fully reflected in shipping prices.

The container prices have come down from the summer peak prices, but not to the level which was expected. Sea freight from India and China are still at considerably higher prices than prior to Covid, but the trend is clearly downwards. The shipping companies have been trying to counter the price decline by for example canceling some scheduled shipping routes, causing further delays to transportation times. Another factor which has affected pricing has been container availability, which is showing some tendency to ease.

On average there seems to be transport price reductions of 10-20% from China and India since the summer months. And a further 10-20% are still expected by the end of the year.

The transit times remain the same from Asia to Europe and are still remaining instable and unexpected delays have been the norm. The congestion is handfast in European ports and delays of 1-3 weeks are normal at the moment. This has slowly started to improve with shipping lines increasing the number of containers in traffic.

Labor costs and currency rates


The steep inflation rates have caused salary inflation in particularly Eastern Europe where 10-20% increases are common. While the same hasn’t been seem in for example Finland, there is a strong trend towards changing jobs which has also lead to salary inflation here.

The FED has continued on its interest hiking path, on a steeper level than expected which has strengthened the US dollar and weakened the euro.

As we last predicted, the EUR/USD has now reached parity, it just happened faster than anticipated.


China’s salary costs have continued their increase but according to some forecasts the increase level would have slowed down to on average about 5% per annum. While Europe is showing higher average salary growth, it would strengthen China’s competitiveness.

At the same time the RMB rate has strengthened by nearly 10% between 2021 and 2022 and has now reached the pre-Covid levels of about 7 RMB/USD where the low-point of 6,33 was reached in March of 2022. This makes Chinese exports generally more attractive, in USD denomination.


The Indian labor costs have been reasonably stable in their rising over each year, but still remaining far below comparable rates in China or Europe.

Trading economics

Latest blog posts

See all blog posts

Combi Works is listed as one of the leading European circular solutions pioneers

Read more

Making Your Purchasing Smarter: A Simple Guide to Growing Your Business

Read more

Combi Works acquires AluFix safety railings

Read more

Introducing MultiV+: A Game-Changer in Drainage Solutions

Read more

Embracing Digital Excellence in Manufacturing: A Combi Works Perspective

Read more