What Everyone Should Know About The Global Steel Market

By May 30, 2017News, Your Advantage

Whether you install HVAC ducting for a living, eat with stainless steel silverware, or depend on your car’s exhaust system to safely get you where you need to go, you use steel on a daily basis. You might not think much about where this steel comes from or how it impacts the rest of the world. But since it’s a much-needed commodity, steel is actually a lucrative export that drives economies around the world.

That said, the world’s steel industry has undergone changes over the last few decades. Instead of using American, European, or Japanese produced steel, chances are that much of the steel you use on a daily basis comes from China, which has been the world’s top steel producer for the last several years.

How the Steel Industry Helps the World’s Economy

Before we consider China specifically, let’s consider how and why steel drives the global economy. On its own, the steel industry directly employs over 2 million people across the world. Indirectly, it employs over 50 million people. Steel is a key component of the power, automotive, transport, and construction industries, among others. While the United States and the European Union are still among the top steel producers worldwide, China has become the top producer. Countries like Turkey, India, Brazil, and South Korea entered the top ten list of steel producing countries as they became more industrialized.

Steel isn’t just at the core of multiple economies though. It’s also one of the mainstays of the world’s green economy. Most renewable energy systems require steel to function, including solar panels and wind turbines. Plus, steel is one of the world’s most recyclable materials. On average, 83% of the world’s steel can be recovered. Just as importantly, the energy steel manufacturers expend to produce their product has decreased by 50%, which has made steel production a more energy efficient process.

The Rise and Fall of the Chinese Steel Industry

Until around 30 years ago, most of the steel you used probably came from European Union affiliated countries, the United States, or Japan. More recently, Chinese steel has started to take over the market, creating a few problems along the way. Pre-1949, Chinese steel development wasn’t very high. In the early years of communist rule, China’s steel production continued to lag behind that of Western countries. When the country started incorporating capitalist reforms in the late 1980s, various Chinese industries expanded to conquer the world market, including the steel industry.

Unlike many other steel-producing countries, China’s steel industry is both massive and state-owned. The central government subsidizes many steel mills, and local governments often have a stake in steel production as well. For decades, these large, state-owned steel corporations have produced massive amounts of steel, flooding the market with cheaper products as hundreds of mills within China compete with each other as well as mills around the world. In the last few years, due to oversaturation, China’s steel industry seems to finally have peaked and flattened out.

Now, many state-owned mills are facing bankruptcy. We are still unsure about the effect this will have on the global market. Bankruptcies will certainly reduce China’s steel output while some Chinese mills, like the provincially owned Hebei Iron & Steel, are relocating to places like South Africa.

End Use Markets

Along with being a widely-traded commodity, steel is also consumed in many end use markets. Based on available estimates, half of the steel produced globally is used in the building and infrastructure sector, which includes housing, rail, bridge, and green energy construction. The mechanical equipment and automotive sectors together account for roughly 30 percent of steel demand, followed by metal products (consisting of consumer and other goods) and other transport (including shipbuilding and trains).

More Steel facts:

  1. Steel is the main material used in delivering renewable energy – solar, tidal and wind.
  2. All steel created as long ago as 150 years can be recycled and used in new products and applications, without any loss of strength.
  3. New lightweight steel is dramatically changing the market. In 1937, 83,000 tons of steel were needed to build the Golden Gate Bridge in San Francisco. Today, only half of that amount would be required.
  4. The global steel industry spends more than $12 billion annually on improving the manufacturing process, new product development and future breakthrough technology.
  5. Approximately 25% of an average computer is made of steel. More than 332 million PCs were sold in 2014.
  6. 97% of steel by-products can be reused. Millions of tons of iron and steel are diverted from the waste stream to the recycling stream due to steel’s magnetic properties that make it the easiest material to separate from the solid waste stream.
  7. Steel is roughly 1000 times stronger than iron in its purest form.

To conclude, all steel comes from somewhere — and serves a purpose almost everywhere. Your car, the heating and cooling in your house, your washer and dryer, your swimming pool, or maybe even the building you work in were most likely made from steel. Due to its extreme recyclability, could have been made from past steel products that were first melted decades ago. Steel is the original “green” industry and its cost is still an excellent value, on a per pound basis cheaper than bananas on sale at your grocery store.

Whether it’s from China, Europe, or here at home, steel will always be part of a larger, global market that is constantly in flux. Luckily, steel itself is incredibly rigid even if and when the market is not.