Mining Companies Lose Power Over Steel-Making Material Prices

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Future steel prices will not follow the patterns of the past decade. The industry has entered a new era, in which the international mining companies have lost their power to lift the selling prices of steel-making raw materials. As a result, steel mill prices are expected to be driven mainly by market supply and demand in the medium term, reports market analyst MEPS International (Sheffield, England).

Steel prices will bottom out around the turn of this year and rise steadily as demand improves. However, the exceptionally high steel prices as witnessed in 2010 to 2012 are an unlikely prospect.

The major mining corporations, in the early part of this decade, decided to invest heavily in new capacity, believing that their key customers in China would continue the rapid rate of industrial growth well into the future. However, when China's rate of economic expansion began to decline, demand for steelmaking materials slowed. The iron ore and coking coal markets are now oversupplied.

Global steelmakers have again gained control of their market, says the report. Steel prices have been in decline in most parts of the world over the last 12 months, but the reduced revenue has not had a significant impact on their profitability. The mills have been able to retain modest but often acceptable margins, even in these difficult times.

Few steel plant closures have been noted in the recent past in industrialized countries, and wholesale work force redundancies have proven to be unnecessary. This has been particularly relevant where past corporate rationalization and restructuring has proven to be useful in balancing steel output with market demand.

For related information, see October 22, 2014, article - Steel Dynamics Sees Strong Domestic Demand in Third-Quarter 2014, Expects Growth from U.S. Shale Boom.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.