Venture Explains: The Plummeting Price of Steel

What’s happening?

According to Al Ghad, the price of steel in Jordan dropped 23 percent to JD385 per ton in the first 10 months of the year, compared to the same period in 2014. The declining cost of the metal in Jordan mirrors plunging prices globally.

Why the dramatic price drop?

Demand for the metal, particularly in weak-growing China, has been waning.

What impact is this having on the global steel industry?

Chinese steel mills were largely responsible for the doubling of global steel production between 2000 and 2014. But as spending on big infrastructure projects began to ease in the faltering economic giant, its steel producers started looking to export markets to offload excess production at cut prices. This has led to a glut of the cheap metal in international markets, piling pressure on other steel producers with higher operating costs. In Britain, for instance, several steel mills have announced major job cuts over recent months.

But all this cheap steel is surely good for a non-producer Jordan?

If homebuyers thought much cheaper steel would lead to significantly cheaper real estate, they’re set to be disappointed. Imad Badran, the general manager of the Jordan Steel, told Al Ghad he doubted real estate prices would fall significantly given that steel only makes up 7 percent of the total cost of an apartment’s construction cost.

What are the chances of prices rising again anytime soon?

The World Steel Association predicts that global demand will fall by 17 percent this year, before rising by 0.7 percent in 2016. But Philip Gibbs, an analyst with Keybanc Capital Markets, warned this could be a long-term trend. “We could see steel prices stay this low for the next 10 years,” he told the Wall Street Journal.