Price of steel

Steel is a key input for several markets, including construction, industrial equipment and durable consumer products, such as cars. The level of activity in these sectors, in domestic and international economies, greatly influences demand for steel, thus affecting the price. Additionally, since this driver tracks the price of domestically produced steel, it is susceptible to fluctuations in exchange rates. A weak dollar makes domestically produced steel more competitive relative to foreign steel, boosting demand and driving up the price. Moreover, it is important to note that this index measures an average of a price during an entire year. Therefore, the values reported at the start of the year tend to greatly influence the direction of change. If some momentary factor increases prices at the end of the year, they will be higher at the start of the next. This tends to inflate the metric's growth rates.

Between 2003 and 2008, these factors trended favorably for the price of steel. The domestic economy surged, led by strong growth in the residential and non-residential construction markets. Emerging economies in China and India invested heavily in construction and infrastructure, lifting demand even further. Meanwhile, improving incomes led to stronger demand for automobiles and many other products, supporting growth throughout the industrial sector. Lastly, the value of the US dollar weakened considerably during the period, aiding domestically produced steel. These factors simultaneously supported the steel industry, causing the steel price index to double from 109.5 in 2003 to 220.6 in 2008.

Nevertheless, by late 2008, the entire world began to experience the effects of the financial crisis and housing market meltdown. The factors behind the steel price surge continued to move in lockstep, but now they moved in the opposite direction. The US automobile and housing sectors plunged, while growth in emerging economies slowed just as investors fled to the safety of US Treasury bills, causing a sharp appreciation in the dollar. The price of steel collapsed to 165.2 in 2009, 25.1% lower than the previous year.

Much of the industry's price decline in 2009 was regained by the end of 2011. However, slowing economic growth in China and debt problems in the Eurozone contributed to a decline in the price of steel during 2012 and 2013. In spite of increased stimulus spending in China, the country's demand for steel did not increase significantly during the year, keeping prices low. Although the world price of steel jumped 2.7% in 2014 due to stronger demand from the United States, the world price of steel declined 11.5% in 2015. According to the Economist Intelligence Unit, global steel consumption declined 3.2% in 2015. This was the first decline in global consumption in six years. However, world steel production only fell 2.6% over the year, resulting in an oversupplied market. Consequently, prices fell substantially with the price of hot rolled coils falling about 40.0% between the last quarter of 2015 and the last quarter of 2014. Prices declined overall in 2016, but the price index did exhibit a rebound during the second half of the year.

As supply and demand realigned in global markets, aided by a 50.0 million metric tonne capacity elimination target in China, the US price of steel rose during the first half of 2017. However, the price spread between the US and other global markets was unsustainably high. Greater than expected steel and raw iron inventories in China then pushed down global prices in the latter part of 2017. Despite supply and demand dynamics in 2018, which would have likely pushed down the index value of US steel prices, steel tariffs drove prices higher. Steel tariffs on China, the European Union and its fellow North American countries placed upward pressure on producer prices in the country. As the tariff took hold, prices increased significantly. In the period immediately after tariffs were put into effect on the European Union, Mexico and Canada, prices spiked as already ordered steel faced the 25.0% tariff.

After the initial surge in prices, however, prices were unsustainably high and began to decline as a result. Still, US steel prices remained significantly more expensive than Chinese and European steel. US businesses that use steel as an input are thus incentivized to purchase foreign steel since in many cases it remains a cheaper alternative despite the added cost associated with tariffs. While steel prices declined globally at the end of 2018, price declines were much more significant in the United States, primarily due to the spread between domestic and foreign steel prices dragging domestic prices down.

Prices continued to decline globally in 2019, largely due to production significantly outpacing demand for steel. The COVID-19 (coronavirus) pandemic also led to declines in steel prices in mid-2020 as the subsequent economic fallout it created depressed demand for steel used in construction and other uses. Steel producers subsequently reduced production output. However, demand from downstream markets recovered rapidly over the latter half of 2020 and early 2021, enabling the price of steel to rebound quickly. Thus, steel producers attempted to quickly increase output, which led to blast furnace outages at major steel mills, creating an even larger supply shortage, driving prices even higher and enabling them to reach historic highs.

In October 2021, Section 232 tariffs on steel and aluminum, initially in place to reduce reliance on imports from US adversaries, were brought to an end. However, the removal of the tariffs would result in a surge of imports due to excess global steel capacity. Conversely, supply chain disruptions present in 2021, amid a recovering economy, affected steel prices, driven by shortages and rising demand. Consequently, domestic steel prices have continued to climb, reaching its highest level with an index value of 449.6 in December 2021. Ultimately, the price of steel rose 90.2% during the year to reach 350.9 in 2021.

The ongoing crisis in Ukraine and the following sanctions placed on Russia have restricted the supply of steel during 2022. Ukraine and Russia cumulatively make up 10.0% of global steel trade. Consequently, continuing tension in the region have further contributed to global supply issues. Additionally, according to SDC, supply constraints at mining firms, rising costs of energy and increased logistics costs have all contributed to rising prices. In 2022, steel prices continued to surge, rising 8.7% during the year to reach 381.54. As supply constraints have eased into 2023, prices have begun to fall, declining 16.2% for the year and being forecast to reach 319.92.

In 2024, US steel prices experienced declines as hot-rolled coil (HRC) prices experienced significant volatility. With the introduction of tariffs in 2025, US prices are expected to increase significantly in the short term, with imported steel being forecast to rise in price. Meanwhile, domestic steel mills are expected to gain leverage in pricing power.