Forecasting of steel price- An Econometric modelling approach

To take investment decisions in the steel industry, steel price forecasting is necessary. Instability in steel price has been exceptional these days and the international steel markets. These sudden and wild swings in the international steel price have occurred rarely before.

An econometric price forecasting model

Using econometric modeling techniques, a statistical approach to price forecasting can be made. On the other hand, econometrics is defined as the application of mathematics and statistical methods to the analysis of economic data. So, the method should be well suited to the task. A mathematical model was developed to gather monthly historic prices for hot-rolled steel coil and reinforcing bar.

Steel Price

Monthly prices would be gathered for a range of commodities including natural gas, crude oil, thermal coal, metallurgical coal, iron ore, electricity prices, ferrous scrap etc.
Correlating factors

Some factors allow a model to be developed between historic prices of hot-rolled steel coil and rebar and the other commodity prices. This approach has also showed that some factors such as coal and scrap prices correlated very well with steel price while other factors did not.

Falling prices

Because of the assumption that, as costs falls, so the cost benefits are passed on to consumers in the form of lower steel prices. This situation helps to sustain the cost competitiveness of steel against other raw materials. However, the long-term fall in costs is evidenced by a long-term squeeze on prices.

The steel price plays a vital role for all the industrialists across the globe and the price is determined with US dollars per metric ton. However, the first decade of the 21st century is not good in terms of steel business and it has added to the inflation. These conditions have worsen economic conditions and reflected in the form of the raised steel scrap price. This made a price hike in the steel industry.

Steel industry is considered as one of the largest industries in the world and it had also suffered a great loss due to the bad economic conditions in the world. The fall down of the economy caused a collapse in this industry as well and the prices of the steel went sky high but the loss to the industry continued to rise.

Earlier, the steel industry had suffered a great drop in the production and profit. The economic conditions started to rise slowly. So, the industry has made an amazing recovery and both the production and the profit have increased. The prices of steel are expected to rise in the near future and the industry is expected to boom again.

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