Are steel prices going up or down?

World steel prices are forecast to fall in 2022. A new outlook from financial information services firm Fitch Solutions indicates world prices to fall to $750 per tonne this year.

Fitch Solutions, which predicted a price drop for the second half of 2021, expects global steel prices to fall from an average of $950 per tonne to $750 per tonne in 2022, with prices eventually falling to $535 per tonne during 2023-2025.

“Our forecast for prices to begin to cool in the second half of the year has been realized, with European and Asian prices declining through the second half of 2021, while U.S. steel prices have begun to stabilize as of October since the exceptional rebound from the fourth quarter of 2020,” the company said.

According to Fitch Solutions, the slowdown in China’s domestic steel demand and increased market protectionism are expected to ease the market and drag prices lower in the medium term.

“We expect the combination of slowing steel consumption growth in China and increased protectionism in the global steel market, which will lead to higher production in affected countries, to relax the market and drag prices down,” the firm said.

Steel demand in China is expected to fall in the next decade compared to the previous one as the Asian nation shifts its economy from heavy industry to the service sector. This will drive down steel prices in China and globally.

Fitch Solutions expects China’s steel demand growth from the construction industry to have peaked in the first half of 2021.

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The importance of steel in the global market

The rise in steel prices in recent months does not have a single reason but is a multifactor increase in price, which can be better understood if we analyze its importance in the global market.
Steel is one of the most innovative and flexible alloys (a mixture of metals), used in the construction sector, transportation (land, sea, and air), infrastructure, the home, research, etc. The development of the 19th, 20th and 21st centuries cannot be understood without this metal which, moreover, as we explained in the post dedicated to it, can be easily reused and recycled, so it meets the sustainability requirements we have to demand for the years to come.

The widespread use of this metal resulting from adding 1 to 2% carbon to iron (and 10% chromium in the case of stainless steel) is due to its hardness, resistance to fracture and corrosion, as well as its relatively low cost. There is no industry that does not use steel.

A relatively recent history

Despite what has been explained so far, steel has not always been such a popular material: the first documented uses date back to 4,000 years ago in Anatolia (Anatolia). 000 years ago in Anatolia (in what is now Turkey), but the steel industry, an indicator of the economic development of countries today, is not considered to have started until the second half of the 19th century, led by the United Kingdom, which accounted for almost half of the world’s pig iron production and 40% of steel and supplied 40% of this production to the United States, which used it, among other things, to build its first towering skyscrapers, huge bridges, and giant ocean liners. One of the visionaries of the use of steel in the USA was Andrew Carnegie, who became one of the key figures in the rapid industrialization of the country, which would contribute to its current commercial and military hegemony and make him one of the richest men in the world.

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In Europe, Germany achieved hegemony in the production of this metal in the first half of the 20th century, which was mainly destined for the war industry.

Today, the countries that produce the most steel are China, India, Japan, the United States, Russia, South Korea, Germany, Turkey, Brazil, and Iran.

STEEL PRICES ARE EXPECTED TO STABILIZE IN 2022

If the prices of inputs rise, logically, the final cost of construction works is impacted, so the only ways out are: either tenders are suspended, or goals are cut: CMIC.

The construction sector expects that by 2022 the price of steel will decrease and stabilize at the levels it had before; since this year, this material suffered an increase of around 40 percent in its price.

This was stated by the president of the Mexican Chamber of the Construction Industry (CMIC), Manuel Antonio Castanedo de Alba, who explained that if steel was sold at approximately 13 pesos per kilo, it shot up to 24 pesos per kilo, which was a brutal increase for builders since steel products such as mesh, beams, and rods also increased.

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In this sense, he said that if the prices of inputs rise, logically, the final cost of the construction works is impacted, so the only way out is to suspend the bids or to cut goals.

However, he affirmed that there is still hope at the end of the tunnel since, fortunately, the increase in the price of steel has slowed down and has begun to decrease, although very slowly.

Finally, he commented that the increases in the prices of materials have an impact on each company to the extent that they require some material since each input for construction is priced in different units, either per kilo, per liter, per cubic meter, or even per ton, depending on the magnitude of the work.