Steel Industry Trends 2022

Steel is a vital part of the global economy, but its volatility has made it a tricky commodity to procure. In 2021, the market was under a lot of pressure from supply chain and global COVID tensions. The market experienced an unprecedented upturn in demand that was not expected to last. The world saw steel prices spike as manufacturers grappled with a worsening shortage of this essential manufacturing component. This post will examine some recent steel industry trends.

Trend 1: Government Infrastructure Plan Will Boost Steel Industry

During the COVID lockdown, the private sector’s demand for steel decreased markedly. Now, the U.S. government’s infrastructure plan will involve traditional and new infrastructure, with spending over eight years. As reported by Argus Media, Phil Gibbs, metals equity research analyst at KeyBanc Capital Markets, predicts a long product demand increase by up to 3mn short tons (st)/yr during the spending period and a flat-rolled demand increase by 1mn st/yr.

Trend 2: Steel Supply Shortages are Easing

Many are asking, “Is there a steel shortage in 2022?” The answer is that after years of oversupply and a steady drop in prices, the steel industry was having trouble keeping up with demand.

Supply chain disruption-led shortages during the last two years have resulted in backlogged steel orders. Many manufacturers scramble to find other project materials because of it. The supply crunch has eased over the past two months, and we are seeing supply catch up with demand. We will see declining prices in most steel categories over the next few months.

Trend 3: Substitutions for Steel and Between Steel Products

According to long-term studies by metal industry consultants, Metals Consulting International, substitutions for steel and between steel products will trend through 2030.

Substitutions for steel products include:

• Aluminum is replacing cold-rolled and galvanized steel in car bodies due to pressure from high fuel prices and government fuel consumption targets.
• Aluminum is maintaining or increasing its penetration into beverage cans and perhaps increasing penetration into food cans against tinplate.
• Strong competition will remain among building materials, including concrete with steel reinforcement, steel sections with concrete blocks, brick, and timber.
• Specialty plastic pipes are replacing cast iron and welded steel in local gas and water distribution.

Substitutions between steel products include:

• Stainless steel replaces coated carbon steel for high corrosion applications or design reasons.
• Tubes are replacing sections in construction steelwork.
• Tubes are replacing fabricated sheets for structural strength in vehicle bodies.
• Steel sections are replacing concrete with steel reinforcement in the construction of low-rise buildings.
• Welded tubes are replacing seamless tubes in some oil and gas applications.

Trend 4: Steel Demand is Impacted by the Russia-Ukraine Crisis

The Russia-Ukraine crisis has had a significant impact on the global steel market. The steel industry’s trends suggest a steel demand decline due to the country’s economic crisis and the sanctions imposed by Western countries. There is also the lost supply from the destruction of the large steel plants in Ukraine.

The European Union, the United States, Canada, and Japan have all imposed sanctions on Russia over the country’s alleged involvement in the Ukraine conflict. The European Union has also banned Russian steel imports for at least six months, forcing Russia to cut its exports by 30 percent in response.

These countries will shop around for steel. Most steel producers, who have just started running through their backlog of orders, may not be able to keep up with the rise in demand. In its Short Range Outlook published in April 2022, World Steel anticipates the global demand for steel to grow by 0.4% in 2022 and by 2.2% in 2023.

The top three steel-supplying nations, the U.S., China, and India, will have to take up the mantle of scaling up their supply. With China’s cap on steel production coupled with India’s export woes and its push to improve domestic availability, which makes Indian steel dearer, only the U.S. steel producers seem to be better equipped to meet the steel demand.

Trend 5: Costs Continue to Rise

Recent surges in raw material prices and the rising cost of energy are other challenges steel producers must overcome. Energy accounts for around 15% of the overall production cost of steel. Gas prices have surged eight times while power costs have soared five times. The main reasons for the cost increases have been the inability of mining companies to keep up with demand because they are making less money in trading.

Furthermore, the cost of logistics has risen sharply. The spike in rates is attributed to congestion at destination ports, an increase in bunker fuel prices, and continued supply chain disruption. Steel producers need to find other ways to make up for the rising cost of production, like raising the price of steel or adding energy surcharges.

What is the Future of the Steel Industry?

Global steel demand has risen and fallen in the past, but it has never been more unpredictable. Steel is essential to infrastructure, construction, manufacturing, and fabrication, which means that its use will always be at least somewhat cyclical. The world’s steel consumption is experiencing a downward trend. The only way to stop the downward trend is to produce less and/or use less. Both are not desirable. Certain factors, such as the war in Ukraine, low growth in China, and rising interest rates, will affect global steel demand in 2022 and beyond.

• WorldSteel Economics Committee Chairman considers the outlook for 2022 and 2023 highly uncertain.
• The situation in Ukraine is getting very dangerous, and the effects of the conflict will be felt worldwide. Higher commodity prices, supply chain disruption, and financial impact from this war have had a global effect.
• Steel producers globally are attempting to recover from supply chain bottlenecks due to China’s clamping down on its steel exports. The U.S., Europe, Russia, Japan, and others are attempting to recover from this issue as well.

Final Word

The steel industry is accustomed to fluctuations. As trends change, one thing remains constant — Westfield Steel carries an extensive inventory of steel, and we also offer a wide range of value-added services to give you production-ready steel delivered when and where you need it. With production running through three shifts, 24 hours per day, we are the steel supplier that can accommodate your just-in-time needs. Contact us today to see how we can meet your steel demands.

 

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