As we saw throughout 2022, volatility continues to impact the steel market. Factors such as global economic uncertainty, recession fears, inflation and fuel prices all placed pressure on steel prices and demand.

Now, as 2022 comes to an end, we are looking ahead to 2023 and trying to determine which of these market forces will continue impacting the steel market. I wanted to share with you some of the trends and topics I’m monitoring to gauge impact on the 2023 steel market.

2023 Steel Plate Pricing & Demand Outlook

As reported by various industry indexes, steel plate prices were elevated in the first half of 2022, then started to soften in August and September 2022 as major mills decreased prices. Prices were then relatively stable through October and November, but declined again in December following a late November mill price decrease. Analysts expect we will see further declines in early 2023, but outlooks remain clouded for the remainder of the year, and it is uncertain by how much pricing will ease.

According to World Steel’s October 2022 Short Range Outlook report, we can expect global steel demand to grow 1% year-over-year in 2023 from 1,796.1 Mt to 1,814.7 Mt. This growth is downgraded from their April 2022 Outlook report, which had 2023 global growth at 2.2%.

World Steel’s analysis says we will see high inflation and rising interest rates negatively affect steel demand in 2023. However, infrastructure projects stemming from government investments will be a welcomed offset and should help boost demand.

Global Economic Uncertainty

Analysts warned of global economic uncertainty starting in 2022. While we saw some of this uncertainty unfold this year, we can expect it to continue through 2023, and the steel plate market will not be immune to volatility. The state of the global economy is important for us to monitor, as it could impact economic growth here in the U.S.

According to forecasts from the world’s largest investment banks, global economic growth will slow in 2023 due to the Russia-Ukraine conflict and rising inflation, which prompted monetary tightening cycles. These forecasts say that we can see 2023 global economic growth range anywhere from 1.6% to 2.3% but the outcome will be highly affected by the Fed’s interest rate policy and bank reserve requirements moving forward.

The International Monetary Fund (IMF) also cut their 2023 economic forecast to 2.7% from a previous forecast of 2.9%. The report cited high inflation, tight monetary policy geopolitical conflict and weakening growth in China as reasons we will likely see a slowdown in growth.

Inflation & Monetary Policies

Throughout 2022, we experienced elevated inflation rates. In response to rising inflation, the U.S. Federal Reserve enacted a monetary tightening cycle and began raising interest rates. Since both inflation and monetary policy have an impact on demand – and the overall economy – this is an area we are watching closely for 2023.

Inflation has likely hit a peak, according to economists. In a recent report, analysts at Goldman Sachs stated that we can expect to see a decline in inflation in 2023 due to easing supply chain constraints and slower wage growth. Their forecast places core personal consumption expenditure (PCE), which is the Fed’s preferred measure of inflation, at 2.9% in December 2023.

In response to slowing inflation, the Fed also indicated that they could moderate rate increases in the coming months from 0.75-point increases to 0.50-point increases. However, Federal Reserve Chairman Jerome Powell stated that monetary policy will likely stay restrictive through at least the first half of 2023 until “real signs of progress emerge on inflation.” He’s made it extremely clear that wage growth and unemployment are a major focus in measuring this progress.  Forecasts show that we should see interest rates reach a peak of 5% in May 2023.

Government Bills & Legislature

Legislature passed in the last couple of years could impact steel demand over the next several years as funds are dispersed for new infrastructure projects.

One such bill that we expect to impact steel demand is the U.S. Inflation Reduction Act. This act includes provisions that aim to support the development and investment of several areas impacting climate and energy. For example, the act grants $100 million towards interregional transmission generated by offshore wind and $760 million for onshore and offshore interstate transmission lines. We expect to see an increase in demand for steel products used in energy infrastructure applications as a result.

Funds from the 2021 U.S. Bipartisan Infrastructure Bill could also impact steel demand in the coming years. The bill has already supported 29,000 new projects related to highways and bridges, and this number will go up as funds continue to be allocated. This will result in greater demand for steel products used in road and bridge infrastructure.

Monitoring Market Trends

It is important to monitor the market forces that impact the steel industry to make strategic sourcing decisions, particularly in times of market uncertainty. However, it can be time consuming to sort through and determine which economic and manufacturing metrics are the most important to follow.

Leeco Steel publishes a monthly steel plate market report to keep our customers informed about these market indicators. This report provides a high-level overview of the news and metrics shaping the steel industry. Sign up below to receive this report directly to your inbox.