The impact of steel prices on all links of the industry

Against the backdrop of global economic transformation and drastic changes in the raw material market, steel prices (and their raw materials such as iron ore, coking coal, and scrap steel) have experienced significant fluctuations. This article will combine the questions that searchers often care about - "Why do steel prices rise or fall?" and "How do they affect each link in the industry?" - to guide you in a systematic analysis and put forward corresponding suggestions.

I. Core Driving Factors of Steel Price Fluctuations
1. Raw material costs - The prices of iron ore, coking coal and scrap steel have a domino effect
Raw material prices are an important component of the cost structure of steel. Research indicates that fluctuations in the prices of iron ore and coking coal will directly affect the prices of steel.
For instance, the latest data shows that the price of iron ore (62 % Fe CFR China) has dropped back to about 104  US dollars per ton.
Scrap steel has also become a key raw material in regions where electric arc furnaces (EAF) are widely used. Fluctuations in scrap steel prices will also be passed on to steel prices.
Why is this impact so strong?
Steel production is highly dependent on raw materials: iron ore provides raw materials for ironmaking, coking coal (or coke) serves as fuel for blast furnace reduction, and scrap steel is an important input for the EAF path. When the prices of these raw materials rise and production costs increase, if steel mills cannot fully pass on the costs, the profits of downstream industries will be compressed.

2. Supply and Demand dynamics: Steel demand, capacity utilization rate, inventory changes
Global demand for steel is influenced by multiple industries such as infrastructure, real estate, and automotive manufacturing. Weaker demand drives down the price of steel.
On the other hand, high steel production capacity utilization or restricted supply of raw materials/steel (such as environmental protection production restrictions and geopolitical disruptions) will also push up prices.
The latest news indicates that one of the reasons for the pressure on iron ore prices is the decline in profits of Chinese steel mills, weakened demand and rising inventories.
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3. Variables in energy, environmental protection policies and production costs
Steel production is a high-energy-consuming industry. Electricity, natural gas, carbon emission costs, and environmental protection regulations may all become hidden "cost increasers".
Policies such as environmental production restrictions and the Carbon Border adjustment mechanism (CBAM) may force producers to bear additional costs, thereby affecting the price structure.

4. Geopolitics, exchange rates, and trade policies
For countries with a high dependence on raw material imports, their costs are also affected by exchange rate fluctuations, import tariffs, transportation costs, trade restrictions, etc.
For instance, changes in the production areas of iron ore and coking coal, as well as adjustments in export policies, will all affect global supply and, in turn, prices.
In summary, the price of steel ≈ raw material cost + supply and demand status + production cost (including energy/environmental protection) + policy/trade/exchange rate factors.

II. Recent Price Trend: Up or Down?
In the later part of 2025 , iron ore prices will show greater downward pressure. The report indicates that due to the slowdown in demand, the increase in supply and the accumulation of inventory in China, iron ore prices are facing considerable pressure.
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Although there are regional and specification differences in the prices of steel (such as hot-rolled coil and sheet), it also indicates that the expectation of cost reduction coexists with sluggish demand. Comprehensive data shows that the trend of steel production costs is highly correlated with raw material costs.
For example: According to  TradingEconomics , the price of steel has recently been about 3,040   yuan per ton (a certain indicator in China).
Therefore, at the current stage, there is a greater tendency towards a downward trend or a sideways movement at a high level rather than a sustained and strong rise.
For searchers, keywords can include: "Current trend of steel prices", "reasons for the decline in iron ore prices", "Pressure on steel prices due to the decline in steel mills' profits", etc.

Iii. Challenges Faced by Midstream (Steel mills/raw material suppliers) and Downstream (processing/Users) Enterprises
1. Pressure from midstream steel mills/raw material suppliers
Profit margin compression: When raw material prices are high and steel prices are difficult to increase rapidly, the profits of steel mills are squeezed. On the contrary, when demand weakens and steel prices fall behind, steel mills may also fall into losses.
Inventory risk: The accumulation of raw material inventory and the increase in finished product inventory may lead to capital occupation and depreciation losses.
The problem of capacity utilization: Weakened demand or environmental protection production restrictions lead to idle capacity, resulting in a decline in output but still maintaining fixed costs.
The cost structure is uncertain: Energy, environmental protection costs, carbon emission costs, etc. have become new uncontrollable variables.
Changes in the bargaining power of suppliers: If raw material suppliers have an abundant supply, their bargaining power will be weak. Conversely, when there are geographical or resource constraints, the bargaining power is strong.

2. Challenges for downstream users/processing enterprises
Lag in price transmission: When steel prices rise or fall sharply, downstream enterprises may face a sudden increase in input costs or order prices that have not yet been adjusted.
The difficulty of purchasing decisions increases: When prices fluctuate greatly, it becomes a dilemma whether to "buy early and feel at ease" or "wait and see", which will affect cash flow and inventory risks.
The impact of weakened external demand persists: If the demand for steel (such as in construction and infrastructure) slows down, downstream orders will decrease and capacity utilization will decline.
Increased pressure on alternative materials and environmental protection: As the cost of steel rises or environmental protection requirements strengthen, downstream industries may consider alternatives such as aluminum and composite materials, exerting downward pressure on the application of steel.
Financing and inventory management pressure: When steel prices decline, if downstream investors hold a large amount of inventory, they will face the risk of asset impairment.

Iv. Countermeasures and Suggestions: How can Enterprises Maintain Stability amid Turbulence?
For steel mills/raw material suppliers
Strengthen cost control: Optimize raw material procurement channels, control the utilization rate of energy and scrap steel, and reduce the marginal cost of production.
Strengthen supply chain integration: Increase holdings or vertically integrate raw material resources to enhance bargaining power and reduce reliance.
Flexible adjustment of production capacity: Timely adjust the production rhythm and inventory scale when demand fluctuates to avoid cost solidification.
Pay attention to environmental protection and carbon costs: Make early plans for low-carbon steel, green smelting and other paths, grasp policy trends, and reduce future cost pressure.
Utilize price hedging tools: Conduct early risk management in response to fluctuations in raw material and steel prices.
For processing/downstream enterprises of users
Diversification of procurement strategies: Develop a "current cost - future demand" model, and determine the timing of procurement based on demand forecasts and price trends.
Inventory and cash flow management: Avoid excessive inventory and enhance liquidity management, especially during periods of high steel prices.
Customer and product differentiation: Enhance product added value and service packaging to reduce simple price competition.
Pay attention to alternative materials and technological trends: When the cost of steel rises or its application is restricted, downstream sectors should explore alternative solutions to reduce risks.
Stay updated on industry price changes in real time: Subscribe to data platforms on steel and raw material price trends (such as  S&P Global Commodity Insights, Fastmarkets) in a timely manner to assist in decision-making.

The fluctuation of steel prices is not accidental but the result of the resonance of multiple factors. For enterprises both inside and outside the industrial chain, the key lies in:
Understand the logic behind price fluctuations (raw materials + Supply and demand + costs + policies)
Build resilience and contingency plans in the face of fluctuations rather than responding passively
Take advantage of the window period of price changes to do a good job in procurement/production/inventory management to enhance competitiveness