Carbon steel is an alloy produced by adding a specific amount of carbon in the steel and the carbon content may vary from 0.12 percent to 2.1 percent by weight. The carbon steel’s density and properties vary with the increase in the carbon content. As the percentage of carbon content increases, the steel becomes harder and stronger but less ductile with a low melting point. In addition to carbon, elements such as copper, manganese, and silicon are also present in small quantities in carbon steel. Depending on the carbon content, carbon steel is classified into 4 types viz. low carbon steel, medium carbon steel, high carbon steel, and ultra-high carbon steel. Carbon steel is mainly used by the construction and automotive industry. It is used for fencing, manufacturing axels, gears, cars, washing machines, blades, high-strength wires, industrial castings, lamp posts, and various other construction activities.
Global Carbon Steel Market: Price Analysis
The global carbon steel market price has witnessed a fall in recent years. In addition to this, the global carbon steel market is growing a slower pace and the Compound Annual Growth Rate (CAGR) for this market has been hovering around 1-2 percent for the last few years. The global market size of the carbon market has been around 1,684 MMTs in recent years. The high maturity regions for carbon steel comprises of China and Europe, while, the U.S. constitutes the low to medium maturity region. The major end-use industries of carbon steel constitute of industries pertaining to construction, infrastructure, and automobile. They account for 36 percent, 22 percent, and 18 percent usage of total global carbon steel output respectively. The market is characterized by primary suppliers such as ArcelorMittal, NSSMC, Hesteeel, Baosteel Group, and POSCO.
With the fall in demand from one of the largest consumers of carbon steel, China, a supply glut has been created in the global carbon steel market. The reason for this is a recent slowdown in the Chinese economy and simultaneous curtailment of production by the Chinese suppliers and various measures adopted by the Chinese government to protect the steel sector. An excess of supply in the carbon steel market has resulted in the fall in the global price of carbon steel. There has also been a fall in the profit margin of the suppliers across the globe due to a fall in the global price of carbon steel. The short contract periods make the suppliers vulnerable to price fluctuations. The suppliers face difficulties in predicting price fluctuations and hence, are not able to adjust their production accordingly.
Global Carbon Steel Market: Industry Analysis and Opportunities
The industry analysis of the global carbon steel market entails recognizing various drivers/opportunities and constraints that impact the capacity utilization and ultimately the production scope of the industries. Following are a few crucial components of carbon steel industry analysis:
- The construction industry is the primary driving force of the carbon steel market on a global scale. In fact, an increase in demand from downstream industries such as manufacturing, automobiles, and engineering is expected to contribute significantly towards the growth of this market in years to come.
- Lately, the carbon steel industries have adopted new and efficient technologies, clean energy, and efficient fabrication and manufacturing process. Consequently, these industries have witnessed a reduction in the cost of steel production. Technological innovations have ensured a low cycle time in the manufacturing process by improving efficiency and production capacity. The raw materials such as iron ore, nickel, and ferrous scrap constitute about 60-80 percent of the total cost of production of carbon steel. Technological innovations have also ensured the optimal and efficient utilization of raw materials, which in turn has reduced the impactful cost components to a great extent.
- Since most of the steel producers are vertically integrated and produce their own raw materials needed for steel production, the supplier power in the global carbon steel industry rangers from low to medium. On the other hand, the buyer power in the market ranges from medium to high and which in-turn depends on the type of end-use industries and the degree of product standardization across these industries.
- The new entrepreneurs face difficulties in entering the global carbon steel market due to the high degree of unionization, high capital cost, and the presence of numerous steel suppliers. The carbon steel market is also characterized by high competition among the suppliers due to excess capacity and stringent exit barriers. As far as the threat from substitutes is concerned, the carbon steel does not have any close substitute because the carbon content is altered according to the requirement of the end-use industries.
Due to the excess supply in the global carbon steel market, the price of carbon steel is falling. As a result, the profit margins of the suppliers across the world have reduced. However, a huge growth opportunity for this market is expected in the coming years with the increase in demand from downstream industries such as construction and automobiles.