A Look at the Immediate State and Impending Forecast for Steel

The steel market isn’t one to remain stagnant. As global manufacturing needs change and supply fluctuates in various regions, demand can change pretty significantly. As with any metals market, it’s challenging to predict what the future may hold. However, there’s no shortage of opinions in the industry.

Reviewing Early-Year Predictions

In 2014, the only way to describe the steel market was to compare it to a roller coaster. While prices remained fairly steady for the first half of the year, prices ultimately peaked pretty high in late September and early October. However, it was downhill from there. Aside from a momentary spike in November, a steady downward trajectory was experienced as the year came to a close.

Coming in to 2015, financial analysts were pretty excited about the chance for a rebound, though. As Mark O’Hara wrote for Market Realist this past January, “In 2015, steel plays’ major opportunity would be key end consumers’ steel demand. The construction, automobile, and energy industries are steel’s key end consumers.” O’Hara went on to mention that these three industries account for at least 75 percent of domestic steel consumption.

However, it wasn’t just the U.S. that experts predicted would see growth. “Despite concerns about its infrastructural capabilities, experts are saying that India is poised to become one of the top producers of steel in the world this year,” a well-known industrial equipment provider reported. Exact predictions said India would increase steel production from 100 million tons to 112.4 million tons as a result of the continued growth of the country’s emerging auto industry.

Looking at the Current State

So how have things actually played out this year? Well, maybe not as well as some had hoped. Though, it’s important to note, that things also haven’t been terrible. According to a press release from Visiongain, “The market has been declining over the past few years as a result of the large oversupply of steel that pressured prices downward.” While it’s big markets like China and India that carry much of the industry’s burden, “Global steel demand over the next decade will mainly depend on the emerging economies.” While steel demand has only grown by 2.4 percent this year in the developing world, the good news is that steel demand is expected to grow by 4.0 percent in 2016.

Oil prices have had a major impact on the steel market this year, as well. Though it should be noted that the impact has varied between countries. In some areas, low oil prices have had a negative impact on steel demand as it relates to infrastructure investments that are typically financed from oil revenues. In other areas, it’s helped businesses and consumers in importing countries and freed up capital to pay for more steel. Ultimately, prolonged periods of lower oil prices may lead to a reduction in demand for steel in some countries, but not enough to have a dramatic impact on the global market. The demand for steel will be there over the long haul.

It’s also interesting to look at China’s economic collapse and how it’s affected steel prices. Without any signs of an immediate rebound and lots of uncertainty surrounding China’s economy, the real estate market has been damaged – thus lowering the demand for steel. Negative growth throughout the remainder of 2015 and 2016 is expected.

Considering the Future

While 2015, thus far, hasn’t been quite the positive rebound many experts had predicted, growth is in sight. Many believe we’re just months away from seeing an uptick in the global steel market, despite lower oil prices and a declining Chinese economy. However, as we’ve seen with this volatile market, predictions are nothing more than predictions.