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 viewA 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.
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 viewLooking at the coming months, many analysts also consider that prices are currently on a falling trend.
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:
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 projectionsRaw 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.
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