The steel industry faced another volatile and rapidly changing market in the first half of 2022, with prices and supply quickly changing due to a variety of factors, including geopolitical conflict, raw material costs and supply chain constraints.

After a volatile six months, we are looking ahead to see how the market pans out in Q3 and Q4. I wanted to share some of the market forces that the Leeco Steel team will be monitoring in the coming months to gauge steel plate pricing outlooks and keep our customers informed.

Steel Plate Pricing & Demand Outlooks for Q3 & Q4 2022

Steel plate prices, as reported by various industry indexes, were elevated in the first half of 2022 and were mostly steady at a level within a few percentage points higher than the 2021 closing figures. We continue to see strong demand, which has kept pricing stable at an elevated level despite the troubling HRC – Plate price spread expansion. Recent weakening of scrap prices also has some analysts anticipating that prices will ease sometime in late 2022. However, timing and magnitude is unknown.

According to the World Steel Association’s April 2022 Short Range Outlook report, we can expect to see 2022 steel demand grow to 0.2% to 1,840.2 Mt. This growth represents a downgrade from their October 2021 Short Range Outlook report, which stated that 2022 steel demand would increase 2.2% year-over-year to reach 1,896.4 Mt.

In their analysis, World Steel cited high inflation across the globe and the Russian invasion of Ukraine as factors clouding their outlook for steel demand. These are two factors on our radar, as well, which we will discuss in more detail later in this article.

Market Trends We Are Watching for the Remainder of 2022

Global Economic Uncertainty

All eyes are currently on the global economy, as this has a major impact on economic growth here in North America.

Since China is one of the world’s largest economies – and the global leader in steel production – we are closely watching their economic growth outlooks. Currently, we are seeing China’s economy struggle following a series of COVID lockdowns in major cities such as Shanghai and Beijing. In April 2022, sentiment among manufacturing and services businesses fell to its lowest level since February 2020, as many businesses were forced to shut down operations in an attempt to curb the spread of COVID cases.

To avoid an economic contraction caused by these lockdowns, Chinese officials stated they would enact policies aimed at stimulating growth, including the acceleration of value-added tax refunds and monetary policy changes to spark positive economic activity.

Europe – another regional economy that has a major influence on the overall world economy – is experiencing inflation at an all-time high within the Euro-zone. The gap between the highest and lowest inflation rates among countries using the Euro currency also jumped to its widest ever in April 2022, indicating economic instability within the region.

High Inflation

Inflation remains a threat to U.S. economic growth, as we are continuing to see inflation well-above the Fed’s target of 2%. In April 2022, the personal consumer expenditures (PCE) price index rose 6.3% year-over-year, and the core PCE index – which removes food and energy prices – rose 4.9% year-over-year.

The recent May release of the overall consumer price index (CPI) suggests that the next PCE print may tick higher once again when next released on June 30. This leaves the Fed in a precarious situation as they struggle to tame inflation via interest rate hikes and a balance sheet reduction while avoiding a collapse of financial markets and demand destruction across many sectors.

Monetary policy and inflation directly impact the economy and consumer demand, which, in turn, has a ripple effect on the steel industry. The Leeco team will keep a close eye on inflation trends through the remainder of 2022.

Rising Oil Prices

As we saw in the first half of the year, oil prices remain volatile and are continuing to rise. As of June 8, 2022, U.S. crude oil prices jumped to $121.86 a barrel, marking nearly a three-month high, and analysts say that we could see crude oil hit $140 a barrel in the coming months.

Many end users of steel plate products are tied to the oil and gas industry, and we will carefully watch oil price trends to determine the impact on this group.

High Fuel Prices

High oil prices, in turn, are driving diesel fuel prices upwards. Since the start of 2022, we have seen steady increases in U.S. on-highway diesel fuel prices, according to data from the U.S. Energy Information Administration.

This trend will likely place upward pressure on freight rates. Freight market conditions impact the ability of plate suppliers to move and receive steel plate – and impact associated costs – which is why Leeco will closely monitor fuel prices in the coming months.

Geopolitical Conflict

We continue monitoring the war between Russia and Ukraine, as it already has impacted raw material prices and availability.

Several analysts recently cut their global economic growth outlooks for 2022, citing the Russian invasion of Ukraine as a major factor for their downgrade. The Organization for Economic Cooperation and Development (OECD), estimates that global GDP growth will reach 3% in 2022, a 1.5% downgrade from their December 2021 projection. The World Bank also downgraded their 2022 global GDP forecast from 4.1% to 2.9%.

Since this war has impacted nearly every aspect of the global economy – and directly impacts steel supply and the materials used to produce steel – we will watch how things evolve to gauge implications for the steel plate market in the second half of this year.

Monitoring Steel Industry Trends

Monitoring the market forces that impact the steel industry is important in making strategic sourcing decisions, especially during volatile markets. However, sorting through the many available economic metrics can be time consuming, and it can be difficult to determine which are most important to monitor.

To keep our customers informed on these market forces, Leeco Steel publishes a monthly steel plate market report that includes a high-level look at the news and metrics shaping the steel industry. Sign up below to receive this report directly to your inbox each month.