The second half of 2017 Steel Price Forecast

Much of the current state of the steel industry can be tied to the rate of Chinese production. Because of China’s massive infrastructure needs, it has significantly ramped up production for the past decade or longer. The increased production and resulting low prices have hurt the steel industry in other parts of the world, including the United States, the U.K. and Japan. But Chinese officials have stated that they will decrease steel production by more than 165 million tons by 2020. That’s a 20% decrease in production for the world’s leading steel producer! This decrease coincides with a “severe depression in construction activity” as well as an overall economic slowdown in China.

Cheap steel from China has been distorting global markets for decades. At its peak, China produced 822 million tons of steel in 2014 compared to 803 million tons in 2015, a 3% drop in production. At this rate, China seems well on its way to reducing its output by 20% by 2020.

Cheap steel is good for consumers whether it’s from China or elsewhere. In fact, Chinese steel output over the past two decades has more often than not, kept global supply higher than global demand resulting in lower steel prices. Supply is not expected to outweigh demand for much longer. In fact, with China dropping its steel output so dramitically, global steel supply is expected to be less than demand resulting in higher steel prices without releif in the years to come.

Supply is not expected to outweigh demand for much longer. In fact, with China dropping its steel output so dramatically, global steel supply is expected to be less than demand resulting in higher steel prices without relief in the years to come.