Steel price forecast for 2021

The spike in steel prices is extraordinary. Many products are up 50–100% since late summer 2020, with the bulk of the increases occurring in November and December 2020. Sheet price in the United States has more than doubled since mid-2020 and just set a new all-time-record high.

Looking at some global prices, Chinese hot-rolled coil (HRC) averaged $465 per metric ton in the fourth quarter of 2019 (pre-COVID-19). It dropped to $440 for the second quarter and briefly approached $420. By late December 2020, Chinese HRC price reached $775 (an 85% increase) but quickly retreated 10%. European HRC was at $506 in the fourth quarter of 2019, stayed below $450 over much of the summer in 2020, then shot up to $840 in January 2021. This is an increase of more than 90%. The United States was at $505 in August; now in mid-January, there are unofficial reports at $1,240, a 146% increase.

Steel prices will spike in the first quarter but fall rapidly over the following months. All products are rising rapidly. Rapid construction and industrial recovery from COVID-19 lockdowns outpaced sluggish capacity restarts, so supply is temporarily tight. Mills have restarted in most regions, so shortages will not last and prices will retreat quickly over the second quarter.

Sheet prices are spiking in the United States at one of the fastest rates in history, despite ample (but idle) capacity. Despite the high prices, buyers should worry more about supply than price for the first quarter of 2021, but should avoid locking prices for the remainder of the year. Other products and regions have high prices for the first quarter of 2021 but are not experiencing shortages.

The buying advice for steel is “wait.” Prices spiked in the fourth quarter of 2020 and are carrying over into January. Prices are above fundamentals and will fall back in the second and third quarters. The exception is sheet, which is on allocation in the United States. Ensuring availability is more of a concern than price. Furnace restarts will alleviate supply and then price by the second quarter. Lead times are long in Europe but there is no allocation so far.
Downside risk is high if the second wave of COVID-19 grows worse. However, if manufacturing and construction are idled, then steel demand and prices will fall.
Upside risk from Australian cyclones is worth watching. Ore mines are at full capacity, so any disruption would be magnified. If cyclones disrupt delivery, ore would spike and with it, steel prices.