Alex Sutton analyzes the steel industry’s market trends and pricing and provides advice for lenders based on the short- and long-term outlook.

Current Trends

    • European demand for steel decreased following the Russian invasion of Ukraine in February 2022.
    • High iron ore prices are driving increasingly higher global steel prices.
    • U.S. vehicle sales, a key driver of steel demand, fell 17.4% year to date through April over the same period in 2021.
    • The Biden Administration announced a one-year suspension of Section 232 tariffs on Ukrainian steel to boost exports during the Russia-Ukraine war.
    • The Section 232 tariffs suspension and recent European Union agreement to cap the tariffs’ effects have somewhat opened the U.S. import market.

Market Outlook

Rising interest rates and supply chain challenges continue to affect global steel availability, pricing and downstream product manufacturing. Experts anticipate demand could rebound by 2023 as supply chain issues improve. However, a potential global recession, the Russia-Ukraine war that began in February 2022, a weaker-than-expected Chinese economy and the supply chain crisis’ lingering effects may derail this recovery.

 Tempered Steel Demand

Global steel demand increased 2.7% in 2021 to 1.83 billion metric tons (MT) despite a downturn in demand from China as recovery from the pandemic was stronger than expected in several other regions.[1] The demand growth outlook for 2022 and 2023 remains uncertain given the Russia-Ukraine war, rising inflation and interest rates, and a COVID-19 resurgence in China.

As such, the World Steel Association forecasts global steel demand will increase 0.4% in 2022 to 1.84 billion MT and 2.2% in 2023 to 1.88 billion MT. The association anticipates European steel demand will rebound in 2023 after decreasing following the Russian invasion of Ukraine. The war and the ongoing pandemic, especially in China, will reduce global demand growth in 2022.

“We expect growth to start coming in 2023 and this is on the presumption that the war in Ukraine will come to a conclusion sometime in this year and at least the end of this year we will begin to see a recovery in the steel use in those markets, but throughout our forecasts we have assumed that steel use in Russia and Ukraine is going to be way down from previous years, and that the impact will flow over,” said Edwin Basson, Director General at the World Steel Association in April.[2]

Pricing Volatile for Iron Ore and Steel

Iron ore prices hit $216 per ton in June 2021, a high not seen since 2008. Prices fell sharply through the summer and fall, hitting $99 per ton in November 2021, and continue to be volatile. In May, prices for iron ore cargo deliveries to China fell to a near four-month low of $123 per ton amid concerns that slowing global growth would hinder metals demand, particularly in China.

Steel prices increased steadily in 2021 after falling in 2020, reaching new highs in September, but decreased again in the fourth quarter and early months of 2022 as supply exceeded demand. The global steel market has rallied since March 2022 as disruption to the pig iron supply in Ukraine and Russia drove a spike in raw material costs. Sanctions imposed on Russia after its invasion of Ukraine in February have largely halted the country’s exports, while shipping disruptions in the Black Sea have blocked Ukraine’s pig iron exports.[3]

Russia and Ukraine’s pig iron supplies account for 60% of U.S. imports, and the ongoing disruptions have led to higher raw material costs and steel prices, which spiked on supply concerns following the invasion of Ukraine. Hot-rolled coil steel prices peaked in April 2022 at levels about 50% higher than at the start of the Russia-Ukraine war in late February but lower than September 2021. Prices receded approximately 12% by the end of May amid concerns about inflation, supply chain challenges and weakening demand. A continued drop in steel prices would likely have a negative effect on the value of raw materials and end-product inventory.

In addition to rising inflation, mining companies will also face higher costs in 2022 if they move forward with maintenance and stripping previously delayed by the pandemic. Companies producing iron ore and those reliant on freight rates and diesel, pet coke and coal could be particularly sensitive to inflation pressures.[4] In addition, electricity and natural gas prices have risen sharply with increased petroleum prices over the trailing twelve months. Natural gas prices alone, which historically have accounted for approximately a third of energy used for steel production in the U.S.,[5] have risen by 179.9% in the same period.[6]

Steel Import Volumes Rising

Total U.S. steel imports in March increased 31.6% over February to 3,091,000 net tons. Total and finished steel imports rose 28% and 48.3%, respectively, in the first quarter of 2022 compared to the same period in 2021.[7] This continues the growth trend seen for the 12-month period ended March 2022 where total and finished steel imports increased 49.9% and 54.9%, respectively, over the prior 12-month period.[8]

The Biden Administration suspended Section 232 tariffs on Ukrainian steel for one year beginning May 9, 2022, to increase steel exports from Ukraine. The Section 232 tariff of 25% on foreign steel and 10% on foreign aluminium were originally imposed in June 2018 on national security grounds. Additionally, the Biden Administration executed an agreement to lift these tariffs for the European Union as of January 1, 2022,[9] establishing a quota system for each country and allowing steel and aluminum exports to the U.S. to be duty free under country-specific thresholds.[10]

Ukraine ranks 13th among global steel producers, but is a relatively minor supplier of U.S. steel, ranking 12th among the country’s foreign suppliers in 2019. However, the sector is a significant source of economic growth and employment for Ukraine, and steel mills have continued to provide income, food and shelter for workers during the war.[11]

U.S. Auto Industry Sales Supressed

U.S. vehicle sales, a key driver of steel demand, fell 17.4% year to date through April over the same period in 2021.[12] New vehicle sales in the U.S. decreased 18% in April 2022 over 2021. Passenger car sales and combined SUV and truck sales were down 23.3% and 16.3%, respectively, for the same period.[13]

The ongoing microchip shortage, rising consumer microchip demand and higher prices for new vehicles are driving declines across the industry, and these challenges may continue into 2023.

AutoForecast Solutions reported a shortage-related global production deficit of 11.3 million vehicles in 2021. Following the outbreak of the Russia-Ukraine war, S&P Global Mobility downgraded its global light vehicle production forecasts by 2.6 million units for 2022 and 2023 to 81.6 million and 88.5 million, respectively. Similarly, the firm reduced its outlook for North American light vehicle production by 480,000 units for 2022 and 549,000 units for 2023. A March 2022 Business Wire report described this reassessment as a reflection of “broad-based reductions given the conflict and subsequent sanctions,” which experts anticipate will affect the production of semiconductors in the second half of 2022 amid ongoing supply chain, labor and logistics issues for the industry.[14]

Valuation Considerations

Although steel prices continue to increase, rising inflation, interest rates and other global economic trends indicate they may decrease in the short term. Historical trends show an inverse relationship between interest rates and commodity pricing. If rates increase further, metals pricing will likely decrease. The cost to carry or finance stockpiles is lower in a low interest rate environment than when interest rates are high.

In the short term, Gordon Brothers expects a decrease in inventory appraisal values based on pricing direction, along with a potentially reduced order book and delayed and cancelled orders. However, appraisal values should remain stable on a mark-to-market basis.





[5] “2018 Manufacturing Energy Consumption Survey Consumption Results, Steel Industry Analysis Brief,” U.S. Energy information Administration, December 2021.

[6] “Henry Hub Natural Gas Spot Price,” U.S Energy Information Administration, May 18, 2022.



[9] Announced in October, but effective January 1, 2022.

[10] “Announcement of Actions on EU Imports Under Section 232, October 31, 2021,” U.S. Department of Commerce Press Release, October 31, 2021.






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