The demand for steel has always been strongly correlated with the health of the international housing market, and the overall economy. As an overall economy improves, the number of housing and commercial building projects jumps significantly, which leads to a far greater demand for steel. Because the housing and infrastructure markets demand the largest amount of steel, and since both of those markets continue to be sluggish at best, we wouldn’t get our hopes up for a high performing steel industry in the coming years.
In the United States, 2012 figures showed a year in which we saw the demand for steel decrease. The down economy was largely to blame, as there were far less housing projects available compared to a decade ago. Another reason for the decline in overall steel demand was the end of the 2008 stimulus package. This package initiated various infrastructure projects, and the majority of those projects were completed by the end of 2011. In fact, nearly 15 percent of all infrastructure projects in 2012 were a direct result of the 2008 economic stimulus package.
Of course, other industries use steel too, with the second-largest being the automobile industry. Again, a down economy leads to a decline in the purchases of high cost items, such as homes and automobiles. With less of a demand for automobiles comes far less demand for steel.
The domestic price of steel fell 13.4 percent in 2012, and you can count on seeing that trend continue into 2013 in the United States. Until the economy sees a significant boom, the demand for steel will stay low.
However, not all nations are decreasing their steel usage. China was one of the top steel users in 2012, and we may see that continue into 2013. China’s growth in infrastructure and their increased demand for automobiles have been outstanding, and their use of steel is much greater than that of the United States. China actually used 2.5 times as much steel as America in 2012. Surrounding countries like Vietnam and Thailand are expected to demand more steel in the coming years, so continued economic growth in the region is expected.
Not all types of steel are created equally. Carbon steel, for example, is much different than stainless steel and, is used to create different products. Stainless steel has typically been used to create high quality and small item products such as car accessories and watches, while carbon steel is utilized for large volume items such as steel bars and rolled steel.
The demand for stainless steel is expected to see a much sharper decline in demand than carbon steel, as its use is directly tied to the demand of luxury items. Since carbon steel is used for a wider range of goods and markets, its demand should remain more consistent in the coming years. Alloy steel, which is used largely in the construction and housing market, can be expected to see a decline in demand in most nations.
Carbon steel might be the only primary steel type which will not suffer from the economy, as it used across a more diverse industry. This allows manufacturers that produce a wider range of steel types to endure the economic hardship in the United States.
Ultimately, the need for steel will eventually improve. Buyers still need homes and cars, and they won’t put off big purchases like them forever. Additionally, as prices for steel decrease as a result of a down economy, demand for cheaper steel will pick back up. Carbon steel is perhaps the only type of steel whose use will remain steady in the next couple of years, but you can bet that the use of stainless and alloy steels will eventually increase as well.
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This article was contributed by Capital Steel and Wire, distributors of hot rolled steel products.