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Market Outlook - Forecasts - World Steel Prices

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Year 2021+ Steel Price Projections

The note that follows considers near-term steel price forecasts - that is, the outlook for world steel prices in 2021 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 March 2005, August 2008, August 2011 and April 2018, with price troughs occurring in February 2006, May 2009 and February 2016. Across these products, the average peak-to-peak or trough-to-trough time over the last 25 years works out at ~3-4 years. In our view, the next price peak can be thus expected around end-2021 and the next pricing trough will occur in the latter half of 2023.

history of steel prices
Note: Price data from ISSB. Figures are monthly average export fob prices, in $ per metric tonne.

It is MCI's view that - at the time of writing (January 2021) - international steel prices appear to be on an upward trend, rising from a recent mid-2020 low.

Near term steel prices - analyst view

Other analysts also consider that prices are currently on a rising trend.

  • Thus, The Fabricator recently reported that near-term steel prices were to remain high in the United States, with no sign of a 2021 slowdown [see The Fabricator report on steel price forecasts].
  • In Asia, SAIL's Chairman Anil Kumar Chaudhary observed in December 2020 that following recent gains, steel prices would stay elevated, and were unlikely to fall soon [see Chaudhary commentary on steel market outlook].
  • According to the Financial Express, the northward movement of the steel prices as at January 2021 remains unabated [see Financial Express article]. Constrained supply and a simultaneous pick-up in demand across a broad range of steel-consuming sectors explain this pricing behaviour.
Supply demand outlook

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 consider that global steel demand growth in 2021 will amount to 4.1% (from 1725 million tonnes of finished products in 2020, to 1795 million tonnes in 2021). This is equivalent to a 2021 increase in steel consumption of ~70 million tonnes [See Worldsteel, Short Range Outlook October 2020].
  • The OECD meanwhile [see OECD Latest Developments in Steelmaking Capacity, Q4 2020] consider that over the three year period 2020-2022, global crude steel gross capacity will increase by approximately 2.5-3.3% from an end-2019 level of 2.36 billion tonnes. This is equal to an increase in steel capacity of ~23 million tonnes per year.

On this basis, we judge that the year 2021 increase in steel demand will outpace the rise in 2021 steel supply (as judged by steel capacity), leading to a significant improvement in 2021 capacity utilisation worldwide, as compared to year 2020 plant loading. In MCI's view, the improved plant loading in 2021 would be expected to result in higher steel prices in 2021 as compared to 2020 price evels.

Raw material price projections

Raw materials constitute a dominant cost input in iron and steelmaking. Further insights into the near-term outlook for international steel prices may therefore be gained by considering price projections for steelmaking raw materials such as iron ore. In the latter half of 2020, these prices had started rising quite markedly - with the Chinese iron ore price (62% Fe spot price for iron ore fines, CFR Tianjin port) increasing from a level of ~$100/t in mid-2020 to well over $150/t by the 2020 year-end.

By January 2021, notwithstanding Chinese government calls for sharp cuts in the country's steel output, these iron ore prices had leapt to $165 / tonne [see Jan 2021 iron ore price report] because of an unprecedented level of demand. According to Westpac, ore prices in early 2021 could go as high as $180/tonne. Indeed, Westpac further considered at end-2020 that "With steel prices continuing to lift further through December, and steel inventories (at both traders and steel mills) rising only modestly, it appears that strong steel sales will continue to be supportive of high iron ore prices at least into the first half of 2021" [see Westpac iron ore price projections].

Platts also note that after an iron ore price peak in 2021, prices may drop by roughly $5-$10/mt each year over the next few years, from an average of $95/mt in 2021, to ~$85/mt in 2022 and ~$75/mt by 2023 [read the Platts forecast].

Market outlook and 2021 / 2022 steel price forecasts

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 2021; and our review of the near-term outlook for iron ore prices – all point to a continuation of steel price recovery as year 2021 unfolds. The MCI assessment therefore is that steel prices will rise to a peak in the final months of year 2021, declining throughout 2022 to a trough towards end-2023.

For projected monthly HRC or rebar prices in 2021 and 2022 or longer-term monthly price projections to 2026, see our our 5 year steel price projections or check out our 10 year steel price forecasts.

Metals Consulting International Limited
16th January 2021

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