Reasons for the Skyrocketing Steel Price and Future Price Trends
Recently, the rise in steel price has attracted a lot of attention. As of mid-May, the average price per ton of steel for the eight major varieties in the national steel market has exceeded 6,600 RMB per ton, a year-on-year increase of 75%.
Reasons for the skyrocketing steel price in 2021
1. Increased market demand
Since the beginning of this year, China’s economy has continued to recover steadily. The demand for steel has increased significantly, of which the construction industry has increased by 49%. The manufacturing industry has increased by 44%. In the international market, the global manufacturing PMI continued to improve. In April, the PMI reached 57.1%, which was above 50% for 12 consecutive months.
2. Global economic recovery
The recovery of the global economy has stimulated the growth of world steel consumption. In the first quarter of this year, the growth rate of global crude steel production has changed from negative to positive, with 46 countries achieving positive growth, compared with only 14 countries last year. Statistics from the World Steel Association show that in the first quarter of this year, global crude steel production increased by 10% year-on-year.
In 2020, in response to the epidemic, various countries around the world have introduced various stimulus policies to support economic development. Due to the over-issue of currencies in the US dollar area and the euro area, inflation has intensified and spread and radiated to the world, leading to an overall increase in global commodity prices, including steel.
4. Raw material prices remain high
As of May 7, iron ore has risen by 152.7% in the past year, and its offer price has reached US$212.75 per ton, an increase of 4.98% from May 6.
The future trend of steel price
From the perspective of the supply-side situation, steel production capacity reduction, “looking back”, crude steel output reduction, and environmental protection supervision work are about to start, and it is difficult for crude steel output to increase significantly in the later period.
From the demand side, due to the rapid and large increase in steel prices since April, the downstream steel industries such as shipbuilding and home appliances cannot withstand the continuous high consolidation of steel prices, and the later steel prices cannot continue to rise sharply.
In summary, it is difficult for steel prices to cool down in the short term. Only with the reduction of inflationary pressures and the demand in the steel market return to a reasonable range, can steel prices return to normal levels.