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Steel prices are set by two forces acting together: the cost of making steel and the balance between available supply and buyer demand. Iron ore and metallurgical coal are especially important for blast-furnace/basic-oxygen-furnace (BF-BOF) mills, while scrap and electricity matter more to electric-arc-furnace (EAF) producers. Construction, infrastructure, manufacturing, inventories, trade flows and excess capacity then determine how much of those costs the market will accept.
A raw-material increase therefore does not guarantee a matching rise in finished-steel prices. A producer can face higher costs while weak demand, abundant supply or imported competition pushes the selling price down. To interpret any quotation correctly, identify the product, grade, region, delivery basis, currency and observation date.
Steel prices start with production costs, but end with market balance
A steelmaker’s minimum economic price is influenced by its costs: metallic inputs, fuel, electricity, labor, maintenance, financing, environmental controls and logistics. The market price is the amount buyers will pay for a particular product in a particular place and time. When demand is strong and supply is tight, producers may recover higher costs and expand margins. When demand is weak or supply is excessive, prices can fall below the level implied by raw-material costs, squeezing producers instead.
This distinction explains why steel prices can move differently from iron ore, coal or scrap. Each input belongs to a different market, and finished steel includes conversion, energy, freight, inventories, product premiums and regional trade conditions. A global raw-material index is not a local quotation for hot-rolled coil, rebar, plate or another finished product.
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Which raw materials matter for each steelmaking route?
The two main commercial routes have different cost exposures. The World Steel Association identifies BF-BOF and EAF production as the major pathways, although individual plants can combine inputs or use hybrid arrangements.
| Production route | Main metallic inputs | Other important inputs | Most direct energy exposure |
|---|---|---|---|
| BF-BOF | Iron ore and coal-derived coke; some recycled steel | Limestone, alloys and product-specific additions | Chemical energy from coke and other fuels, plus electricity and plant energy |
| EAF | Recycled steel (scrap); may also use direct-reduced iron or hot metal | Electricity, limestone, alloys and product-specific additions | Electricity is especially important |
Iron ore and metallurgical coal in BF-BOF mills
A BF-BOF operation reduces iron ore in a blast furnace, using coke made from metallurgical (coking) coal as a principal source of chemical energy and reducing gas. The resulting hot metal is refined in a basic oxygen furnace. Iron ore quality, coal quality, coke performance, limestone consumption and plant efficiency all affect the cost per tonne.
Because these materials are traded internationally, freight, port conditions, currency movements and regional availability can change a mill’s delivered cost even when a headline benchmark is stable. A producer with long-term contracts, local supply or different ore quality may experience a different cost change from a producer buying spot cargoes.
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EAFs melt metallic charge with an electric current. Scrap can account for as much as 100% of EAF inputs, although some furnaces add direct-reduced iron or hot metal to control chemistry or availability. Electricity prices, grid constraints, demand charges and the timing of power consumption can therefore have a large influence on EAF economics.
Scrap is not an unlimited substitute for ore. The World Steel Association says it can represent up to 30% of the BF route’s input mix and that supply depends on historical steel use, collection and recovery rates, and the lifetimes of products already in service. A surge in current steel demand does not instantly create more obsolete steel for recycling. This makes scrap both a cost input and a constrained resource.
Limestone, alloys and coatings
Limestone helps remove impurities, while alloying elements determine properties such as strength, corrosion resistance and formability. Galvanized and other coated products also require coating materials and additional processing. These inputs are usually smaller than the main metallic charge, but their prices and availability can matter for particular grades and product specifications.
What changed in raw-material markets in 2025?
The OECD’s Steel Outlook 2026 reported the following calendar-year changes. They are historical changes, not live October 2026 quotations. The report’s latest raw-material observation was 23 January 2026.
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| Input or basket | Reported 2025 change | Qualification |
|---|---|---|
| Iron ore | Up 9% | OECD figure reported in the 2026 Steel Outlook |
| Coking coal | Up 17% | OECD figure reported in the 2026 Steel Outlook |
| Scrap | Up 2% | OECD figure reported in the 2026 Steel Outlook |
| Typical steelmaking raw-material basket | Up 10% | OECD basket measure for 2025 |
The basket is an analytical reference, not a universal cost index for every mill. The OECD series includes benchmarks such as 62% Fe iron ore, premium Australian coking coal and Northern European shredded scrap. Those specifications are not interchangeable, and a producer’s actual blend, contracts and freight costs can produce a different result.
How energy prices change steel competitiveness
Steelmaking is energy-intensive, but energy exposure differs by route and location. Scrap-based production avoids some of the chemical energy needed to remove oxygen from iron ore. EAFs instead rely heavily on electricity to melt the charge. BF-BOF plants depend more on coke and other fuels for reduction and heating, while still consuming electricity throughout the works.
World Steel Association guidance emphasizes that energy costs depend substantially on the type of energy and the plant’s location. Coal is traded globally, whereas electricity is often priced locally or regionally. As production uses more electricity and less globally traded coal, differences in power prices, grid reliability and carbon rules can have a stronger effect on which regions are competitive.
A higher energy bill is a cost pressure, not an automatic price increase. If buyers have alternatives and inventories are high, a mill may have to absorb the increase through a lower margin. If supply is tight, the same cost shock may be passed through to customers.
How demand from steel-using industries affects prices
Demand is derived from sectors that consume steel rather than from steelmaking alone. Construction and infrastructure use rebar, beams, plate and other products. Manufacturing uses sheet, strip, plate, wire and specialized grades in vehicles, machinery, appliances and equipment. Regional industrial production, building starts, public works and inventory decisions can therefore move prices in different directions.
The OECD’s 2026 outlook estimated that global steel demand contracted 2.6% in 2025. It projected 0.4% growth in 2026 and average annual growth of about 0.9% through 2030. These are estimates and forecasts, not final outcomes. They describe a global average that can conceal large regional differences.
| Measure | OECD estimate or projection | How to interpret it |
|---|---|---|
| Global demand in 2025 | Contracted 2.6% | Estimate for the year, not a live 2026 reading |
| Global demand in 2026 | Growth of 0.4% | Projection in the 2026 outlook |
| Average annual global growth through 2030 | About 0.9% | Projection over the period |
| India in 2026 | Growth of 6.7% | Regional projection |
| China in 2026 | Contraction of 0.6% | Regional projection |
India’s projected expansion and China’s projected contraction illustrate why a global demand number cannot serve as a local price forecast. A mill selling into a growing construction market may see stronger orders even while another region faces falling manufacturing demand.
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Why excess capacity can outweigh higher input costs
Supply conditions are as important as demand. The OECD estimated global excess steelmaking capacity at 640 million tonnes in 2025 and projected 745 million tonnes by 2028. Excess capacity means plants can produce more than the market needs. Producers may continue operating to cover fixed costs, preserve employment, service debt or maintain customer relationships.
When domestic demand is insufficient, mills may export. Additional material offered into international markets can depress finished-steel prices, even if iron ore, coal, scrap or electricity costs are rising. The result can be a decline in steel-to-raw-material margins: producers pay more for inputs but receive no equivalent increase for their products.
Capacity figures are global aggregates. Their price effect depends on where the spare capacity is located, which products it makes, whether logistics permit exports and what trade measures apply in the destination market.
How trade, disruptions and inventories transmit price shocks
Trade restrictions can affect both sides of the equation. Export limits on scrap or other steelmaking inputs can tighten supply for importing mills. Tariffs, quotas and other measures can alter the delivered cost of finished steel and redirect cargoes between regions. A disruption to a mine, port, rail line, power system or shipping route can change availability and freight costs.
Geopolitical events may raise energy costs or interrupt flows, but the impact is not uniform. A disruption affecting a coking-coal route matters more to a coal-dependent BF-BOF producer than to an EAF with secure electricity and scrap. A regional outage may lift one market’s price while leaving another largely unchanged.
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Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallInventories add a time lag. Buyers that accumulated stock can delay new orders after a demand improvement, while depleted inventories can create a rapid restocking surge even before end-user consumption changes. The same production data can therefore produce different prices depending on what is already in warehouses and at service centers.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why a raw-material move does not pass through one-for-one
Several mechanisms break a simple cost-plus relationship:
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- Route mix: An ore or coking-coal move affects BF-BOF costs more directly than EAF costs; a scrap or electricity move does the reverse.
- Product mix: A mill making a specialized grade may have different alloy, coating and conversion costs from a mill making a commodity product.
- Market power and competition: Imports, excess capacity and competing domestic mills limit what buyers will accept.
- Contracts and hedging: Contract formulas, inventory purchased earlier and forward coverage delay the effect of a spot-market change.
- Freight and currency: Delivered costs can rise or fall independently of a benchmark because shipping rates, exchange rates or port conditions changed.
- Demand elasticity: Construction or manufacturing buyers may postpone projects, substitute materials or reduce inventories when prices rise.
These factors determine whether a cost shock appears as a higher quotation, a smaller producer margin, a change in product premiums or a shift in trade flows.
How to compare steel-price information correctly
Before comparing two numbers, record the attributes below. If any differ, the figures may describe different markets rather than a genuine price change.
- Identify the material. Is it iron ore, coking coal, scrap, billet, rebar, plate, hot-rolled sheet or another product? For raw materials, note the grade or benchmark specification.
- Check geography. Distinguish domestic, import and export assessments. Record the producing or consuming region.
- Check delivery terms. Note whether the number includes freight and the delivery or trade basis used.
- Normalize units and currency. Confirm the tonne definition, currency and any conversion used.
- Record the date. A spot observation, monthly average, contract reference and forecast are different types of information.
- Separate input from finished steel. A 62% Fe iron-ore benchmark or Northern European shredded-scrap series cannot be read as a quotation for a finished steel coil.
- Check product specification. Grade, thickness, width, coating and quality requirements can create premiums that overwhelm a small change in the base market.
A practical framework for explaining a steel-price move
When a quotation changes, analyze it in this order:
- Start with the product and market. Establish exactly which price moved and where it is delivered.
- Map the dominant production route. Estimate whether the relevant region relies mainly on BF-BOF, EAF or a combination.
- Check the exposed inputs. Compare the recent direction of ore, coking coal, scrap and electricity against the route’s charge mix.
- Measure demand at the sector level. Look at construction, infrastructure, manufacturing and inventory behavior rather than relying only on a global headline.
- Check available supply. Include operating rates, excess capacity, imports, exports, outages and trade restrictions.
- Test the margin explanation. Ask whether the move reflects higher producer costs, stronger buyer willingness to pay, tighter availability or a combination.
- State the time horizon. A spot move may reverse quickly; a contract or capacity change can influence prices for months or years.
This framework prevents a common error: attributing every steel-price movement to the latest iron-ore headline when the decisive factor may be weak regional demand, a surge of imports or an inventory correction.
What readers should treat as current—and what they should not
The OECD figures above provide a dated account of 2025 changes and forecasts published in its 2026 outlook. They do not establish live steel prices for October 2026. A current quotation requires a narrowly defined product, market and date, along with a current price source. Without those details, a statement such as “steel is at” one number is incomplete and can be misleading.
The most reliable interpretation combines a product-specific price with the relevant raw-material benchmarks, route exposure, demand indicators, capacity and trade conditions. No single global number captures all steel markets.
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