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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.
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.
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.
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.
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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