Falling Steel Prices: The Past, Present and Future?

Categories : Procurement Goals | Set Strategy | Assess Opportunity | Evaluate Supply Market | Save Money Published on : Aug 29 2017

By: ProcurementIQ Analyst, Mark Seraydarian

In March 2016, when steel prices in the United States reached all-time lows of less than $400 per metric ton, most forecasters expected prices to soon rebound. The November presidential election results emboldened such lines of reasoning as calls for protectionism and infrastructure spending goaded the anticipation of steel price increases. However, as the market stands nine months after Election Day, steel prices have yet to bounce back. What’s more, the bottoming-out point is likely ahead of us, not behind. In fact, in the three years to 2020, ProcurementIQ anticipates that the price of steel in the United States will fall at an annualized rate of 1.3%. ProcurementIQ also projects that global steel prices will decline at a sharper annualized rate of 3.4% from 2017 to 2020.

Reasons Behind Recent Price Trends

At the end of last year, US steel prices had begun to rise, but 2017 has seen tepid growth. A number of warning signs are harbingers of the negative market corrections likely on the horizon. First, Chinese steel prices have declined year to date, but US prices have yet to follow suit. As a result, US imports of steel are up from a year ago, which means US steel producers may have to decrease their prices to compete with less expensive steel from overseas. Until now, US steel prices have been immune to global developments, but this can only last so long; repercussions are probable.

Second, promises on the campaign trail of a blanket import tax and heavy infrastructure spending, which would boost domestic steel prices, have not been realized. With each passing month of limited government action on these fronts, US steel prices become more and more precarious and in danger of precipitous declines.

2017 Steel Prices: US vs China

How Buyers Can Capitalize on Falling Prices

While domestic steel suppliers face challenges finding relief in a difficult market, buyers of steel and steel products benefit from low and falling prices. The forecast price trends of many steel products, such as automatic guided vehicles, industrial robots, industrial welded carbon steel pipes and injection molding machines will be impacted. Instead of rising as previously anticipated, these products’ prices are expected to either hold steady or fall in the years to come.

Such a change has a profound effect on how buyers can negotiate with suppliers, providing them with additional leverage during the purchasing process. When forecast price trends are rising, it is in buyers’ interest to close deals sooner rather than later to avoid paying steeper prices. However, when prices are anticipated to decrease, buyers can delay signing contracts and use that as leverage for added benefits, such as bundling discounts or lenient pricing. Currently, the steel market provides buyers with significant leverage to garner the lowest possible prices.

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