Steel

The steel industry is a foundational sector, producing an alloy of iron and carbon essential for numerous applications due to its high elastic modulus, yield strength, and low raw material cost. It involves melting iron ore, scrap metal, and other additives to produce molten metal, solidified into various forms. Steel is critical in construction, infrastructure, automotive, shipbuilding, machinery, and household appliances, making its production and consumption key indicators of economic health. The business is highly capital-intensive with long gestation periods for new plants, acting as a significant barrier to entry.

The steel industry's performance is influenced by economic, technological, and regulatory factors. Economic growth, especially in emerging markets, drives demand for infrastructure and industrialization. The automotive and manufacturing sectors are major consumers, with electric vehicles increasing demand for high-strength steel. Technological developments like AHSS, EAF technology, automation, and digitalization enhance efficiency and quality. Sustainability and green steel initiatives, driven by environmental regulations, are becoming crucial trends. Regulatory changes, including emissions standards and trade policies, significantly impact operations and market competitiveness.

Competition in the steel industry is intense, with global producers competing on price, quality, and delivery times. Major players include China Baowu Steel Group, ArcelorMittal, POSCO, Nippon Steel, and JSW Steel. These companies compete through strategic investments in modernizing facilities and developing specialized products. Common strategies involve scaling electric arc furnace (EAF) projects, advancing specialty steel production, and investing in green hydrogen steelmaking. The industry is cyclical, with demand dependent on economic conditions in sectors like construction and automotive.

The global steel industry has recently faced a challenging environment with declining prices and profitability. Global crude steel production for 2025 is forecast to be 1.846 billion tonnes, a downward revision. Apparent steel consumption is projected to drop by 0.9% in 2025. While demand is contracting in China and OECD economies, growth is expected in emerging markets, particularly in ASEAN, MENA regions, and India. Overcapacity remains a serious issue, with planned capacity expansions risking further exacerbation. An increase in business failures is anticipated. The outlook for 2026 projects a rebound in apparent steel consumption by 3.4%, contingent on an improved industrial outlook and easing geopolitical tensions, though overall demand remains highly uncertain.

Investors in the steel industry face risks including sensitivity to economic cycles, volatility in raw material prices, and geopolitical factors like trade policies, political instability, and currency fluctuations. Global excess capacity intensifies downward pressure on prices. The industry faces pressure for decarbonization, requiring costly changes and investments in greener technologies, which can be hampered by reduced profitability.