The Global State of Steel: 3rd & 4th Quarters 2016

Corus IJmuiden, Netherlands. Photo by Sander van der Molen Corus IJmuiden, Netherlands. Photo by Sander van der Molen[/caption]

As a global commodity, the price of steel varies daily, and those prices are influenced by several factors, including the price of oil, availability of recycled steel, and the condition of the world economy in general. But the single most important factor that determines current steel prices is supply and demand. Here’s a third quarter update on the world steel supply and prices, as well as a look at the global state of steel in the fourth quarter and predictions for 2017.

3rd and 4th Quarter Steel Reports

Steel prices reached an all-time low in March, but prices began to increase steadily starting in June before leveling off in October. World crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) in October 2016 was 136.5 million tonnes, up 3.3% from October 2015.

One of America’s major steel producers, Nucor, reported a slight increase in revenue in the third quarter of 2016 in contrast to the third quarter of 2015, but revenues still missed expectations. Nucor expects fourth-quarter earnings to fall, hurt by lower profit margins at its steel mills. Nucor says that demand for cold-rolled and galvanized sheet products remained solid, while demand for hot-rolled sheet products weakened (in comparison to the first half of 2016). In the fourth quarter, demand for steel products usually decreases as building activity declines in winter (in the Northern Hemisphere). Read “Nucor Reports Results for Third Quarter and Nine Months of 2016” here. 

ArcelorMittal, the world’s largest producer of steel, reported third-quarter core profit below expectations. It’s predicted that the final quarter would be weaker than the third, as higher coal prices and lower US steel prices hit margins.

ArcelorMittal also slightly improved its market outlook for China, the world’s largest producer and consumer of steel, where it now sees slight growth of apparent steel consumption. Read “ArcelorMittal reports third quarter 2016 results” here. 

According to a recent release from the World Steel Association, global steel demand will increase by 0.2%  in 2016, following a contraction of -3.0% in 2015. In 2017, it is forecast that global steel demand will grow by 0.5%.  Read “worldsteel Short Range Outlook 2016 – 2017” here. 

What’s in Store for Steel Prices in 2017 and Beyond?

Record low steel prices over the past 18 months are in a stark contrast to the American Institute of Architect’s (A.I.A.) prediction that non-residential construction will experience 6.7 percent increase in the United States in 2017.

Overcapacity in the Chinese steel sector has led to a surge in exports, which steelmakers in Europe and the US have sought to counteract by lobbying for anti-dumping duties.

China is reducing its steel production by 20% in 2017, which will cause demand to outweigh supply for the first time in over a decade. This is predicted to cause a sharp rise in steel prices during 2017 and lasting through 2020.

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