Steel price forecasting is somewhat fundamental to every one portion of investment decisions in the iron and steel sector. Recent volatility in steel prices however has been unprecedented. The international steel markets saying prices for hot rolled steel coil – every single one much a ‘benchmark’ steel product – rise from knocked out $600/tonne in the first quarter of 2008 to going on for ~$1000/tonne by mid-2008. Just a few months far afield and wide along, by sustain on 2009, the hot rolled coil price was below $500/tonne, gone related price oscillations seen for reinforcing steel bar. Such wild and rapid swings in the international steel price have rarely if ever been witnessed past.
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Price expectations
For some months after the onset of the crisis, it was felt that it would be several years or even longer to the fore prices would compensation to the heady levels of mid-2008. But in the January 2011, discussions taking into account more turned to benchmark steel prices hitting $1000/tonne within a matter of months. The scene is set so for what may be every one of much more variability in steel pricing in the innovative than has been evident in the p.s.. In these circumstances, the gaining to correctly deliver judgment gone steel price movements becomes still more hard.
An econometric price forecasting model
A statistical admittance to price forecasting can be made, using econometric modelling techniques. Econometrics are defined as the application of mathematics and statistical methods to the analysis of economic data, consequently the admittance should be accurately suited to the task. On this basis, a mathematical model was developed by MCI whereby:
monthly historic prices for hot rolled steel coil and reinforcing bar were gathered across a 16 year period horizon
monthly prices were along with gathered for a range of commodities, including substandard oil (as an indicator of commodity prices, generally), natural gas (as an important completion source for steel pants), thermal coal (as an important fuel e.g. for steel proficiency nature), metallurgical coal (used in the blast furnace), electricity prices (used to completion electric arc furnaces), iron ore (as a dominant source of iron units for basic oxygen steel making), ferrous scrap (as a dominant source of iron units for electric steel making)
statistical correlations (i.e. the mathematical model) were received together along along with the steel products a propos the one hand; and the commodity prices upon the additional.
Correlating factors
The steps above allowed a model to be developed along amongst historic price of hot rolled steel coil and rebar; and the new commodity prices. The right to use showed that some factors such as coal and scrap prices correlated definitely considering ease subsequent to the historic steel price, whilst new price factors (e.g. electricity prices) did not.
Looking lecture to
Looking attend to, independent estimates of well ahead commodity prices were obtained from leading sources such as the World Bank and the Energy Information Administration. These forecasts were subsequently plugged into the mathematical model obtained above. The consequences of this econometric modelling right to use indicates that:
the speak to projection is for maintained relatively tall progressive hot rolled coil and steel rebar prices, subsequent to
average prices long-lasting expertly above pre-crisis levels from now to 2015
prices staying relatively constant across 2011 to 2013
new price rises received in 2014 and 2015, which will lift f.o.b. hot rolled coil / reinforcing prices some $150 per tonne in the medium-term
but without reward to a scenario involving f.o.b. steel prices at $1000-$1100/tonne [prior to 2016].