Following two years of consecutive declines amid soft conditions in manufacturing and construction, global prices for steel are expected rebound slightly in 2014, a leading forecasting firm says.

In its latest update, UK based steel industry forecasting firm MEPS says its All Carbon Steel Products Composite Price edged back up in August following four consecutive months of decline but remains down by more than a quarter compared to the most recent peak in April 2011.

MEPS says demand has been affected by weak economic conditions in Europe, though it was helped of late by signs of strengthening in the building industry in the United States.

Going forward, MEPS says it expects a likely rise of around $US25 per tonne in the next three months resulting from tight availability for some products in the US and rising iron ore prices affecting Chinese producers to be short-lived as prices turn downward again toward the end of the year in response to traditionally soft fourth quarter demand in western countries.

Nevertheless, the forecasting firm expects a stronger upturn early next year amid greater balance between supply and demand, albeit with some of this movement slated to reverse toward the summer holiday season as buyers finalise the bulk of their inventory building and production levels start to outstrip market requirements.

“A more pronounced recovery in transaction values is foreseen as customers start to place orders for delivery at the beginning of 2014,” MEPS said in a recent statement.

“Steelmakers are expected to make output cuts, during the [Northern Hemisphere] winter. This should lead to more equilibrium between supply and demand in the new year. Price growth is expected to continue during the first quarter, supported by anticipated rises in raw material expenditure which usually take place in this period.”

carbon steel products chart

All told, MEPS says it expects prices in 2014 on average to be four per cent higher compared to this year.

The latest forecast comes as weak prices wreak havoc on steel manufacturers around the world.

ArcelorMittal, the world’s biggest steel maker, lost a massive $US1.125 billion in the first six months of this year while locally, large-scale write-downs saw Arrium (formerly OneSteel) and BlueScope lose a combined total of $779 million throughout 2012/13.

While lower prices for steel and other building materials have provided a silver lining for the building and construction industry in Australia over the short term, many in the industry are concerned savage cutbacks in capacity will impact the domestic supply chain over the longer term.

Thanks largely to plant shutdowns, figures from the World Steel Association suggest Australia is now producing roughly one third less steel than it was as recently as two years ago.