Global Steel Price Rally Will Be Short Lived

The steel industry remains subject to various risks that could affect demand, prices and margins, including those related to the pandemic, such as a wider virus spread, slow vaccination and new strict lockdowns. Input costs will continue to affect steelmakers' profitability and cash flows. Growing steel demand is to a large extent driven by a recovery in the automotive sector, but semiconductor shortage is a risk for a continuing demand recovery. Political and geopolitical developments, such as a reduction in government stimulus programmes, policies to cut emissions and trade wars, could increase pressure on the sector.

The recent global rally in steel prices will be short-lived, Fitch Ratings says, with prices starting to decline towards the end of 1Q21 as steelmaking production continues to be restarted. Vast steelmaking capacity idled during the heights of the pandemic could not be brought online quickly enough to meet recovering steel demand and restocking, leading to the rapid rise in prices.