WSD Strategic Insights CXCIV: Steel industry odds for 2026

Here are the possibilities…

WSD foresees a modest reversal in the downside forces that have plagued the industry the past two three years despite underlying steel demand that may be little changed – in fact, down moderately in China, but less so than this year due to another rise in infrastructure spending and a modest recovery in housing activity, and up moderately outside of China due to rising fixed asset investment.  Here’s our “most likely” forecast for industry conditions:

1. The HRB export price appears to have a lower limit of about $420 per tonne and an upper one of about $550 per tonne, FOB the port of export; that is, unless there’s a steel shortage in which the price could rise temporarily to $600 per tonne. During much of the year, however, we expect the HRB price to range from $450 to $550 per tonne.  As usual, the Chinese mills will export at the lowest price; but their export volume may not pick up substantially reflecting:  a) a further rise in exporting restrictions due to trade suits in a variety of countries; b) further pressure to reduce steel production y/y; and c) perhaps some improvement in demand – albeit not necessarily y/y growth.

    

2. Chinese steel demand is flat or only falls back 0-1% as the housing market finally “bottoms out” and additional government stimulus government succeeds in boosting activity in the sector through “shantytown” renovations. Meanwhile, modest growth of infrastructure spending continues while investment in manufacturing slows from recent “hyper speed” levels.  As well, the government may accept a lower GDP growth target, which would dampen steel intensity.

3. Non-Chinese steel demand surges by about 6% due to rising fixed asset investment. Regarding the GDP growth outlook, WSD is counting on a recovery of the EU and USA economies, with the latter driven by a “détente” in the tariff wars leading to a boost in investment.  The economic slowdown in the past year (2025) in a number of Developing World countries, including that in Vietnam, Turkey, Brazil, and the Middle East is reversed. 

3. The price of steelmakers’ raw materials does not experience a significant increase – although, the price of coking coal could be vulnerable to an upside correction should supply overreact to the downside based on low prices the remainder of this year.  Steel scrap prices are expected to remain inherently volatile. 

    

4. The oil price rebound somewhat from its recent lows near $60 per barrel (and has already done so in recent days to a degree) but remains subdues in general because production boosts in Saudi Arabia and new offshore developments, outpace reductions elsewhere and fail to substantially reduce excess oil production.  Oil and gas production in the USA remains stagnant as low prices disincentivize drilling of new wells (pending the lasting impact, if any, of the most recent Israel/Iran conflict).     

6. President Trump hammers out trade deals with a number of foreign countries. In China’s case, its exports to the USA remain under substantial tariffs (>25%).  With respect to other countries, gradual resolution of tariffs with Mexico/Canada via the re-negotiation of the USMCA agreement leads to a “thaw” in economic relations compared to the situation at present.  On a best-case scenario, as WSD sees it, additional agreements are reached with key geopolitical allies such as Japan, S. Korea and the EU.     

7. The Chinese financial colonial system, given its commitment to infrastructure investment in Developing Countries, often along the “Silk Road” that hundreds of years ago connected China to Europe, continues to expand.  Its investments increase Developing Countries’ dependence on China. 

8. Capacity reductions accelerate in China.  Once this occurs, the Central Government will be providing the funds for the re-education of, and relocation of, steelworkers.  Interestingly, when a Chinese steel company moves out from its city location, new manufacturing plants may be built in the same place, which will provide an opportunity for the employment of terminated steelworkers.

Odds for various scenarios to 2026

In the assessment below, we are more optimistic about 2026 than 2025 because we think that Chinese steel exports will be declining and steel demand ex-China rebounding from 2025 lows. 

This report includes forward-looking statements that are based on current expectations about future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict. Although we believe that the expectations reflected in our forward-looking statements are reasonable, they can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including among other things, changes in prices, shifts in demand, variations in supply, movements in international currency, developments in technology, actions by governments and/or other factors.

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