What’s going to happen to steel prices in 2005? Metal Center News surveyed the greatest minds in the industry (our readers) and reached the following conclusion: Nobody knows.
Data from the 2005 Service Center Outlook Survey—the subject of this month’s cover story—reveals that the market is almost evenly split between those who say steel prices will increase even further, and those who doubt steel can sustain such historically high price levels for much longer, thus a market correction is inevitable.

Metal Center News forecasts only about a 1 percent decline in steel prices in 2005, based on an average of respondents’ projections. That would indeed be good news for the service center industry because it would mean prices—and margins—would remain far above traditional levels for a while longer. Service centers could look forward to another boom year much like 2004.

But allow me to inject a hint of skepticism into the math here. Roughly 40 percent of respondents said they expect steel prices to increase, while about the same number expect them to decrease. The remaining 20 percent predicted no change, which means they expect, or at least hope, that steel prices remain sky high. So it’s a 60-40 split in favor of prices at or above 2004 levels.

Those who predict an increase in steel prices expect them to advance another 10 percent. Those who predict a decrease in steel prices expect them to recede by 13 percent. If you think about it, since prices will invariably go up or down to some degree, one group must be 100 percent wrong. So you may want to decide which camp you fall into and base your plans accordingly, rather than relying on a watered-down average of both.

The outlook for aluminum is considerably clearer. Sixty-three percent of service center executives predict aluminum prices will increase in 2005, by an average of 11 percent. Another 23 percent expect no significant change. So it’s 86-14 in favor of aluminum prices at, or more likely above, current levels.

Similarly, it’s an 80-20 split in the copper market, favoring prices at the same or higher levels. The 44 percent predicting an upturn expect prices to increase by about 12 percent.

To put the reliability of these figures into perspective, consider that last year’s respondents predicted an average 7 percent increase in the price of steel, when in fact the price actually more than doubled. So they were off by more than 100 percent, though they correctly recognized the trend.

Given the unprecedented state of the global economy and the metals market—with anomalies like the boom in China, the war in Iraq, the shortage of raw materials, etc.—service center executives are in no better position to predict prices today than they were last year.

While many respondents to the survey expect their profitability to moderate, more than nine out of 10 remain either somewhat or strongly optimistic about their prospects for 2005. Pricing may defy prediction, but it’s a safe bet that the service center industry is on the brink of another very good year.