Steel: Cycles

Why steel prices swing harder than steel output

Steel demand follows construction and manufacturing, and prices swing more than volumes. The US producer price index for mill products peaked at 382 in 2022 (1982=100) and fell to about 290 in 2025. Scrap prices tell the same story: US heavy melting scrap averaged $417.66 a tonne in 2021 and about $319 in 2025. The World Steel Association expected flat global demand in 2025. Capacity is sticky because blast furnaces are costly to shut and restart. Surplus capacity, much of it in China, therefore depresses prices and triggers trade disputes.

US price, No. 1 heavy melting steel scrap, delivered composite (Fastmarkets AMM)

Super-cycles in steel

Steel output tracks the world economy closely, and prices swing more than volumes because mills are costly to idle and capacity is sticky. Smil traces the cycles: fast growth after 1950, a halt after the 1973-74 oil shock, 15 years of fluctuation to a 1989 record, a decade of stagnation, then China's expansion. Prices rose and fell sharply around that China boom, with US hot-rolled coil going from about $350/t in 2000 to $1,200/t in 2008. Since 2015, Chinese overcapacity has kept world prices low while tariffs, such as the US 50% rate of 2025, have pushed prices apart between regions.

1. 1974-1989

   After the oil shocks Japan's and Europe's steel output stalled (EC output fell from 156 Mt in 1972 to 128 Mt in 1980, at 60% utilisation), forcing closures and cartels in Europe while new mini-mills took share in the US.

   No consistent price series in sources used; world output took 15 years to reach a new record in 1989 (Smil).

2. 1995-2001

   Excess foreign capacity of about 250 Mt, nearly twice US consumption, and falling prices drove more than half a dozen US steelmakers into bankruptcy in 1998-2000; US steel employment fell to 151,000 by 2000.

   Steel prices low and declining from 1995 to 2000 (Smil); US hot-rolled coil about $350/t in January 2000.

3. 2002-2009

   China's construction and manufacturing boom pushed world output and raw-material costs to records, before the 2008 financial crisis. Scrap prices more than doubled in early 2008 and then fell about 70% by year end.

   US hot-rolled coil from about $350/t (Jan 2000) to above $800/t (mid-2004), a record $1,200/t (July 2008), and $400/t a year later.

4. 2014-2016

   Chinese steel demand fell for the first time since 2000 while capacity kept growing; China's exports flooded world markets and 'steel became as cheap as cabbage'.

   US hot-rolled coil just above $500/t in early 2015, with Western Europe about $100 lower and China $200 lower (Smil).

5. 2021-2025

   Post-Covid restocking and stimulus lifted prices, then China's property slump turned it to exports again; the US raised steel tariffs to 25% for all countries in March 2025 and 50% in June 2025.

   US producer price index for mill products 351 (2021), 382 (2022), about 290 (2025) (1982=100); US heavy melting scrap $417.66/t (2021) to $319/t (2025) (USGS).

What drives the cycle

• China construction and property cycle. China makes over half of world steel (980 of 1,900 Mt in 2025), and construction takes about half of use.
• Industrialisation in India and other emerging economies. Per capita use in India (64 kg in 2013) is a fraction of China's, so India, Vietnam, Egypt and Saudi Arabia drive growth (WSA via USGS).
• Overcapacity and trade policy. Surplus capacity, much of it Chinese, depresses prices and triggers tariffs such as the US Section 232 duties.
• Raw material costs. Iron ore, coking coal and scrap prices set the cost floor for each route.
• Decarbonisation. Carbon prices and green steel demand favour scrap EAF and hydrogen DRI over coal-based blast furnaces.

Metrics to track