Market Outlook - Forecasts - World Steel Prices
The note that follows considers near-term steel price forecasts - that is, the outlook for world steel prices in 2022 and beyond.
The price cycle - MCI view
A notable characteristic of world steel prices is that they are highly cyclical. As can be seen in the chart below, prices move from peak to trough every few years.
Looking at pricing for typical steel products such as hot rolled coil (HRC) or reinforcing bar, the latest prominent peaks occurred in August 2011, April 2018 and September 2021; with price troughs occurring in May 2009, February 2016 and June 2020.
Across these products, the average peak-to-peak or trough-to-trough time over the last 25 or so years works out at ~3-4 years. In our view, the next price peak can be expected around Q3 or Q4 2025 and the next pricing trough will occur in mid-2023.
Note: Price data from ISSB
. Figures are monthly world average export fob
prices, in $ per metric tonne.
It is MCI's view that - at the time of writing (January 2022) - international steel prices appear to be declining, dropping from a September 2021 high. Other independent observations appear to agree with this view, as discussed below.
Near term steel prices - analyst view
Looking at the coming months, many analysts also consider that prices are currently on a falling trend.
Supply demand outlook
- According to Fitch, world steel prices are forecast to retreat in 2022 as the global price rally ends. Indeed, Fitch's projection is for 2021 world prices of ~$920/tonne to fall to ~$750 / tonne in 2022. For more information, see The Fitch report on steel price forecasts.
- Hellenic Shipping similarly discuss anticipated reductions in steel selling values in the second half of 2022 across all world regions.
- S&P Global also consider that 2022 will bring significant steel price corrections worldwide, and attribute these pricing adjustments to the negative sentiment flowing from China's property market, as exemplified by China Evergrande's financial woes. For further discussion, see S&P market intelligence report.
Another way to consider the pricing outlook is to consider future prospects for the global steel supply-demand balance. In this respect, it is noteworthy that:
- The World Steel Association (worldsteel) consider that global steel demand in 2022 will grow by 2.2% over 2021 levels (from ~1855 million tonnes in 2021, to ~1896 million tonnes in 2022). This is equivalent to a 2022 increase in steel consumption of ~41 million tonnes [See Worldsteel, Short Range Outlook October 2021].
- The OECD meanwhile [see OECD Developments in Steelmaking Capacity, 2021] consider that over the three year period 2021-2023, global crude steel capacity will increase from 2453 million tonnes to an 2023 average [high-low] of 2532 mt. This is equal to an increase in steel capacity of ~26 million metric tonnes per year.
On this basis, we judge that the year 2022 increase in steel demand is likely to outpace the rise in 2022 steel supply (as measured by steel capacity), leading to a significant improvement in 2022 plant loading worldwide, and [notwithstanding any demand collapse in China] helping to underpin generally good price levels.
Raw material price projections
Raw materials constitute a dominant cost input in iron and steelmaking - especially iron ore - but to a lesser extent - metallurgical coke also. Further insights into the near-term outlook for international steel prices may therefore be gained by considering price projections for these key steelmaking raw materials.
Market outlook and 2022 / 2023 steel price forecasts
- Prices for iron ore hit an all-time high in mid-2021, with significant price falls in subsequent months. According to Bloomberg reports, iron ore's heady days are now fading as China's growth engine cools.
- S&P Global also comment on the souring outlook for iron ore prices in 2022, which are expected to drop from over $200/tonne in mid-2021, to around $100/t in 2022. For discussion, see S&P report
- Regarding coking coal, Fitch predict that prices will average higher in 2022 at $240/tonne than their $225/tonne average in 2021. See coking coal outlook. Steel industry economist James King similarly projects somewhat higher coking coal prices in 2022 compard to 2021, but expects future Chinese metallurgical coal prices to continue to fall during 2023, 2024 and 2025.
- Given the dominance of iron ore compared to coking coal or other raw materials in BOF steelmaking, it follows that overall steelmaking raw material costs will decline significantly in 2022, as compared to year 2021.
Taken together, MCI's assessment of the current level of steel prices in the context of the longer-term price cycle; with our assessment of expected changes to the steel supply demand balance in 2022; and our review of the near-term outlook for iron ore and met coke prices – all point to a declining steel price as year 2022 unfolds. The MCI assessment therefore is that steel prices will gradually fall during year 2022, declining to a trough towards mid-2023.
For projected monthly HRC or rebar prices in 2022 and 2023 or longer-term monthly price projections to 2027, see our our 5 year steel price projections or check out our 10 year steel price forecasts.
Metals Consulting International Limited
18th January 2022