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Economics & Country Risk Commodity Coverage - Metals

Steel Price Forecast and Market Outlook

Steel price forecast for 2021: Steel prices remain elevated, supply chain disruptions delay price declines to the second half of 2021

Sheet prices continue to strengthen however the pace of the increases has started to decelerate. Extremely cold weather disrupted the collection of scrap and delivery of ore and scrap in Europe and North America over the first quarter, tightening supply and boosting raw material prices. Increases in input costs have added approximately $200–250 per ton to steelmaking costs. Aside from sheet, price increases in Mainland China and Europe have largely mirrored the rise in input costs, while US prices have increased more.

At the same time, Mainland China has also started enforcing emissions restrictions in key northern steel-producing provinces, further tightening global steel supply and unintentionally stoking psychological momentum. As the weather improves, these pollution controls will ease but will not be completely lifted. Prices will fall later in the second quarter and decline noticeably in the third and fourth quarters. The risk depends on the extent that restrictions on steel production are retained or relaxed.

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Will steel prices go down in 2021?

Steel prices are extreme and should decline from late second quarter through the end of 2021. Locking now will mean over-paying over the second half of the year. Either buy on spot or be sure your contract has an escalator clause because in coming months it would act as a de-escalator. Supply chain disruptions have delayed expected declines but fundamentals of supply and demand still point toward a turning point in coming months.

When should you make a steel purchase?

We retain “wait” buying advice for steel, or at least be sure your contract has an automatic price adjustment. Prices will start to ease by late in the second quarter and fall over the second half of the year. Declines were delayed by bad weather—but only delayed, not prevented. The exception remains sheet in North America, which is on allocation and should remain so through May, perhaps June. Ensuring availability is more of a concern than price. Furnace restarts and sharply increasing imports are starting to alleviate the supply crunch but the first step is to replenish inventory.

Bottom line: Steel markets are the worst for buyers in at least a decade, and for US sheet the worst ever. However, markets should turn soon as increased production and imports alleviate supply shortages. There is no shortage of capacity; the problems were caused by capacity remaining idle too long after demand started to recover from COVID-19 lockdowns.

Global hot rolled cold rolled and galvanized steel sheet prices forecast

Experts

Laura Hodges

Ms. Hodges is responsible for the management and operations of the Pricing and Purchasing Research team. Ms. Hodges has managed several projects on global cost analysis, including projects in Asia and South America, where the objective was to recommend the most cost-effective and efficient action in the procurement of key materials and services. She has spoken extensively on the topic of procurement pricing strategies and the global cost environment, including a presentation at the Institute of Supply Management titled, "Has China Lost Its Low-Cost Edge?" She has made presentations on the "Economic Risks to Consider Before Bidding Your Next Contract," and "Understanding and Estimating the Skilled Labor Shortage," at a conference of the Association for the Advancement of Cost Engineering. Ms. Laura Hodges holds a Bachelor of Arts in Economics from the George Washington University, U.S., and a Master of Arts in Health and Labor Economics from Duke University, U.S. She also earned an MBA from Rutgers University, Beijing, China.

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John Anton

Mr. Anton has expertise in the ferrous metals industry, he is responsible for evaluating the outlook for steel. He also specializes in forecasting commodities and works closely with the Automotive, Construction, Energy and Economics teams at IHS Markit. Steel demand is linked to outlooks from these key sectors. In turn, the profitability of these sectors can rise or fall depending on the price and availability of steel.Prior to joining IHS Markit, now IHS Markit, in 1995, he was in the private practice of law as well as an economist and statistician for the United States Department of Labor in the Bureau of Labor Statistics (BLS). Mr. John Anton received a Bachelor of Science in Economics from Florida State University, US, and a Juris Doctor from the Marshall-Wythe School of Law at the College of William and Mary, US.

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Amanda Eglinton

Ms. Eglinton provides price forecasts and market intelligence to enable smarter purchasing decisions and supply chain cost savings for buyers of steel pipe, stainless steel, nickel and other ferroalloys. She also participates in IHS Markit consulting projects as a steel subject matter expert. Prior to joining the Pricing and Purchasing team, Ms. Eglinton was responsible for providing market intelligence on the supply and demand of onshore pipelay contractors and line pipe as part of the IHS Markit Energy Cost and Technology group. She also has experience working as a research analyst for the Emission Reduction Credit (ERC) trading desk at Element Markets, a leading renewable energy company. Ms. Eglinton holds a masters of arts in applied economics from the University of Houston, and a bachelor of science in finance and economics from Saint Louis University.

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