Market Trend and AnalysisExamining the Past 100 Years Where Is the Steel Super Cycle Headed?
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Looking at long-run data of real steel prices over the last 100 years, high volatility in steel prices is not just a recent phenomenon. Steel prices had high volatility from a long time ago and repeated long-run cycles with ups and downs. If the long-run trend, long-run cycle, and short-run cycle could be decomposed from steel price data, it would help in determining the direction of steel prices. With the development of a “band-pass filter” in the 2000s, it became possible to decompose a long-run trend, super cycle, and short-run cycle from real data.
According to this analysis of US real HR prices from 1900 to 2016, it turns out that the long-run trend peaked in the early 1970s and declined afterward. The super cycle, which is a long-run cycle with upswings lasting from 10 to 35 years, peaked in 2011 and entered a downward phase. Decomposition of real steel prices suggests four super cycles. Amid a prolonged low growth of the steel industry, the critical factor to shorten the super downtrend and downcycle is how fast excessive capacity can be reduced. It is also important how fast the economic growth of emerging markets, especially India and the ASEAN, will offset a steel demand slowdown in China.