As we approach the end of the first half of 2021, steel markets in Europe and the United States continue to heat up. This six-month period is largely unprecedented, with both steel prices and steelmakers’ margins hitting a number of new record highs throughout.

The rally is likely nearing its end, however, with global steel output continuing to increase toward pre-pandemic levels. China has been setting monthly record levels of steel production recently, while output in Europe is largely back to, and even above, pre-pandemic levels now. Similarly, capacity utilization in the US has risen above 80% for the first time since the pandemic emerged just over a year ago.

For the time being, steelmakers cannot produce material quickly enough for buyers in Europe and the US, with large distributors still looking to fill gaps in their inventories in both regions. As such, those currently renegotiating contracts for the second half of the year find themselves in a strong position.

The need to replenish stocks will come to an end eventually, however, leaving the market more dependent on underlying end-use demand. Prices within and exported out of China have pulled back notably in recent weeks and imports are looking ever more viable for consumers elsewhere, even as many of them they remain behind significant trade barriers. Should this dynamic continue, then we would expect spot market prices in Europe and the US to move notably lower as well after the summer, with contract prices to fall back next year.

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