Both carbon steel and stainless steel are used in a variety of consumer and commercial applications. Chromium is added to stainless steel that prevents it from corrosion and its ratio in the steel alloy determines the grade of the steel. On the other hand, carbon steel has a natural matte finish similar to cast iron due to high carbon content. Carbon steel does not corrode like iron but it gathers a thin black layer of oxidation over a period of time which does not cause any severe harm to the metal but lowers its aesthetic appeal. The modern global infrastructure is shaped by steel and it is used in every household and workplace in different forms, shapes, and varieties of objects. Due to its natural matte finish, carbon steel is not preferred in aesthetic use cases whereas stainless steel is used for manufacturing decorative products along with the ones that do not require any paint or finish on the outer surface.
The surge in the Carbon Steel Market Share in the Past Five Years:
Considering the growth in the global carbon steel market in the last five years, the expected increase in downstream was 1,571 MMT in 2018. On the other hand, the global carbon steel market share grew at a Compound Annual Growth Rate (CAGR) of 1-2 percent between 2016 and 2018. The reasons were supply surplus and condensation measures by the Chinese steel markets. The construction industry has played a major role in the growth of the global steel industry as it constitutes 36 percent of total end-use of steel. However, the prices of steel have also declined due to the surplus market conditions in regions such as North America and China.
The drivers for such changes have been downstream demand, need for cost reduction, and innovations in technology. Downstream industries such as construction, engineering, and manufacturing have impacted the steel market. In addition, global industry leaders are pushing forward for cost reduction and as a result, new technologies for fabrication and manufacturing processes have been incorporated to reduce the Total Cost of Ownership (TCO). The industry is looking forward to attaining low cycle time in the manufacturing process and improve production capacity.
Factors that have been a hindering factor in the growth of carbon steel industry are surplus supply since 2014 and weak economic growth of China. The country has been the largest consumer of steel and due to its weak economic growth, the prices have come down. However, the recent global curtailment and lower production rates are sure to improve the conditions soon. In addition, falling prices of steel have caused lower profit margins to the steel suppliers for the past 1.5 years. Suppliers may also face commodity price fluctuations and due to shorter contract tenures, they cannot hedge.
Global Steel Market Opportunities:
According to the current trends in the global market, the steel market has significant potential to be a clever business idea. Steel supply can be considered a decent idea for stepping into the industry as it is relatively easier to start a business in the steel industry due to its ever-increasing demand and low overhead requirements. The industry also does not require higher education degrees from famed universities as a well-defined road map of business and understanding of market variables will suffice.
However, the business requires a long-term strategy and it will also need to build its reputation in the industry. Prestigious clients always prefer reputations and business relationships and therefore, it is not easy for a new business to reach a higher enterprise level. The business should aim for the best possible quality of steel as it is more than just a selling point. Every product that goes out of the facility should meet quality standards and to achieve that, strict quality control processes are needed.
Secondly, being a capacity-driven business, a steel company should pan its capacity so that there is no project overload. All the global industry leaders are great capacity planners who scale their operations periodically to meet the changing demands. The third most important aspect of a steel business should be equipment maintenance. Equipment will not stay in good working order forever and it requires scheduled maintenance. Here, maintenance tracking software can be a plus as it can be a business’s first step toward automation.
Steel business may be witnessing a few setbacks but this is only a temporary situation. The setbacks are due to low demands from larger consumers such as China. Despite the current situation, the market is on the positive side as steel has a never-ending demand which will only go higher in the future. Talking about business opportunities, a business stepping into the industry must consider the growth driving factors and give importance to market competition. This is because local markets can only sustain a few large players and the decision-makers have to ensure that they are not destroying the market in the wake of beating their competition.