The year 2021 spells “excellent” for a lot of industrial metals, including steel. According to the World Steel Association, the demand for this material would increase by almost 6 percent in 2021. That’s equivalent to almost 2 billion metric tons.
By the following year, it could grow by another 2.7 percent that by the end of the forecast period, the need would have already reached close to 2 million metric tons. The positive forecast comes after a mild slump in 2020, where the need contracted by around 0.2 percent.
What is fueling the growth of industrial steel in the market? One of the obvious reasons is China, which remains one of the leading producers of the metal. The country was also badly hit by the pandemic, but eventually, it became an outlier among all major economies when its own only expanded by at least 2.3 percent in 2020.
And although China’s economy in 2021 slowed down during the second quarter, only increasing by 7.9 percent, this wasn’t too far off from the country’s objective of 8.1 percent. It also posted a smashing recovery rate during the first three months of the year when it expanded by a whopping 18 percent.
Besides this, at least two big industries boost the need for industrial metal supply in the United States: automotive and housing.
The Revival of the Automotive Industry
The growth of the automotive industry over the years seems not that stellar, according to Good Car, Bad Car data. In 2018, dealers were able to sell about 17.3 million vehicles. But that dropped slightly to 17.023 million the following year.
The COVID-19 pandemic made it worse. Around this time, the industry sold only 14.6 million. The lockdowns, job losses, and the decreased demand forced many factories to either shut down or shift their manufacturing to consumer electronics, particularly laptops, as more people had to work from home.
That was a year ago. Now, the economy is bouncing back—fast—and many Americans are ready to get back to their old lives and on the road. They are also looking for brand-new vehicles.
The problem is the demand is quickly outpacing the supply. According to Newsweek, the country has no more than 2 million new vehicles up for sale.
Why is this happening? There are a couple of reasons:
- Factory shutdowns and the shift in manufacturing means that these facilities never really had enough inventory for 2021.
- The automotive industry is affected by the shortage of microchips, which are essential components in many automated and tech features of vehicles.
- Many employees plan to quit their jobs if they have to give up their work from home and return to the office. A number are resigning for better compensation. In other words, factories may not have sufficient people to do the job.
The decline in supply means that the average price of new vehicles is high. In fact, it has already increased by at least 10 percent. But this can be good news to dealers, which are also trying to recover, and investors in the market. This also bodes well for the industrial steel industry as the metal remains a viable choice for making cars.
The Hot Seller’s Market
Another industry that could be driving the need for industrial steel is housing. Unlike the automotive sector, the real estate market flourished in 2020 despite the stay-at-home orders and lockdowns. Many Americans, particularly those living in more urban areas, are moving to places with wider spaces. They also swap condos and apartments with homes with yards for better movement, children, and pets.
The activity continues in 2021, transforming the market in favor of the sellers. This means the demand has already exceeded the supply. A couple of factors that may be causing these:
- Many homeowners may still be reluctant to sell their properties, so there’s not enough on the listing.
- Mortgage rates are, on average, low. Existing homeowners can refinance their homes, which implies they won’t have to sell their property anytime soon. On the other hand, the low rates can tempt homebuyers to secure a house now.
But probably the biggest reason is there are not enough homes in the country—period. According to Freddie Mac, before the pandemic, the United States was already short of 2.5 million houses. By 2021, another data revealed that the number might have already increased to almost 4 million.
For many Americans, housing and cars are two essential possessions. They can also be the costliest assets, and the low supply for both can only mean higher expenses for families.
Hopefully, by increasing the inflow of vital metals like industrial steel into the country, manufacturers would have a bigger incentive to create more, which will then help to stabilize the market. This way, these essentials will become more affordable for Americans.