Steel price fluctuations 2025: MSME procurement guide

The steel industry plays a critical role in global infrastructure and economic development. However, steel prices are highly volatile, influenced by various factors affecting steel prices. These include steel price fluctuations in raw material costs, global demand and supply dynamics, trade policies, energy prices, and geopolitical events.

Understanding these key factors is essential for businesses, investors, and policymakers to navigate market uncertainties and make informed decisions. By analyzing these variables, stakeholders can better predict trends and develop strategies to mitigate risks associated with price fluctuations.

Why 2025 matters for steel buyers (Q4 outlook)

The last quarter of 2025 has brought steel buyers into a tough spot. Production in India has been rising through the year, pushed by government spending on highways, housing, and rail. But more supply has not meant steady prices. Rates have shifted month after month, leaving many MSMEs struggling to keep tenders profitable.

Market pressures

By September, the cost of imported metallurgical coal moved higher, which pushed up the running cost of blast furnace mills. At the same time, scrap became less available in several regions, adding pressure on electric arc furnace units. Local stockists passed these costs down quickly. Smaller manufacturers who buy in weekly lots, instead of longer contracts, felt the squeeze almost immediately.

Policy and compliance changes

Policy decisions also added to uncertainty. In August, the Directorate General of Trade Remedies proposed safeguard duties on some flat steel imports. Import offers reduced soon after, and domestic mills gained the upper hand. Mid-year, new BIS codes for structural grades came into force. And firms that failed to upgrade their certificates surely saw tender submissions questioned or rejected.

With this context in mind, let’s now have a look at the key factors driving steel price fluctuations in the year 2025.
Also read: Steel Plants in India (2025): Top Producers & Projects

Key factors affecting steel prices

Steel functions as a critical material which markets worldwide for construction along with manufacturing industries and other sectors. Several influencing variables determine the price variations of steel products.

The understanding of driving forces in steel prices delivers essential value to steel production participants along with steel consumers and traders when used for enhancing business development and protect against market risks. This post examines several variables that influence prices within the essential steel marketplace.

1. Raw Material Costs:

The steel production industry utilizes iron ore together with coal particularly coking coal and scrap metal as its primary raw materials. The market prices of raw materials directly affect the prices of steel products in a major way. Supply difficulties combined with higher demand for iron ore automatically triggers a rise in steel market prices. A reduction in raw material prices drives down the cost of steel products in the market.

Must read: Raw materials examples for businesses in India

2. Supply and Demand Dynamics:

Steel prices operate according to the basic economic principles between supply and demand like all other commodities. The rising demand from construction combined with the automotive along with infrastructure development projects repeatedly leads to steel price elevation.

The price of steel increases when the main sectors expand their use of steel but decreases when both these sectors demonstrate reduced activity or when steel production exceeds market needs. Global economic development plays an essential role since strong industrial development typically increases steel market requirements while heightening steel prices.

3. Energy Prices:

Production of steel includes high energy usage which creates an energy-intensive industrial process. The price volatility of electricity and natural gas affects production expenses for steel manufacturers which translates to changes in steel price levels.

The steel sector must adjust their manufacturing costs when energy prices rise because it leads to profit erosion which requires increased pricing; alternatively lower energy prices enable producers to lower their steel costs.

4. Government Policies and Regulations:

The prices of steel depend heavily on various government policies together with trade regulations and environmental regulations. The implementation of tariffs on imported steel results in higher import costs thus improving domestic steel market competition which may cause prices to rise.

Higher steel mill production expenses resulting from enhanced environmental regulations play a role in elevating the price of steel products. Investments from the government through infrastructure ventures simultaneously increase both steel market demand and selling prices.

Must read: Union Budget 2025: Key Expectations for Steel & Infra Industries

5. Currency Exchange Rates:

International steel trades require proper evaluation of currency exchange rates since exchange rates profoundly affect pricing.

Changes in exchange rates create price fluctuations for imported steel which will also determine market competitiveness of domestic steel producers. When the domestic currency strengthens it makes imported steel products cheaper which could possibly lower domestic steel price levels.

6. Global Economic Conditions:

The condition of the worldwide economic system acts as the primary factor that shapes steel market values. Higher economic development in leading markets like China together with the United States and European regions normally boosts steel consumption which consequently increases prices. Economic recession together with slowdowns in the economy reduce market demand thus lowering steel prices.

7. Technological Advancements:

The prices of steel are affected by long-term changes in production technological advancements. Innovations that enhance production efficiency and control costs and utilize different raw materials for steel production tend to cause steel price reductions.

The implementation of innovative technologies demands substantial capital investments which might result in higher prices during initiation.

Must read: Steel innovations in the construction sector

8. Speculation and Market Sentiment:

The metal price value of steel responds to the same forces that affect other commodities through speculative bets and changing market sentiments. Price movements regarding the future act as a basis for traders and investors to place bets which then create market volatility.

Market sentiment combined with news events along with geopolitical developments that predict future supply and demand patterns leads to both changes in market sentiment and steel price fluctuations.

9. Scrap Metal Prices:

Electric arc furnaces utilize significant quantities of scrap metal materials for steel production purposes. The cost to produce steel rises and steel prices escalate when scrap metal prices undergo changes. The behaviour of steel prices either rises or falls according to the price of scrap materials.

Must read: Iron scrap rate today – Prices per kg, daily rates (Jan 2025)

10. Seasonal Factors:

The price performance of steel is sometimes affected by seasonal aspects in select areas. Building projects generally reduce their operations during severe winter seasons which reduces steel consumption and causes market prices to decrease. The rise of construction work in favorable temperatures generates both enhanced market requirements and increased product prices.

What steel price swings mean for MSMEs

Price swings in steel do not hit all businesses the same way. Large producers can hedge their positions or carry excess stock. Smaller firms rarely have that cushion. For MSMEs, even a modest jump in price can upset tenders, delay supply, and stretch working capital.

Procurement risks

The tendering cycle is where the first cracks appear. Many MSMEs quote at fixed rates in government or EPC contracts. If steel becomes costlier before the order is executed, the loss sits with the bidder. Some suppliers withdraw earlier offers when costs rise, leaving the buyer to renegotiate at the last minute. This weakens client confidence and often delays dispatch.

Day-to-day operations

Stockholding is another challenge. Few small units have space or money to maintain large inventories. Most buy weekly or fortnightly. When rates move quickly, each round of purchase becomes costlier. A delayed delivery of steel sections or rebars can bring fabrication or construction work to a halt.

Cash flow pressure

The financial strain is immediate. Paying more upfront to stockists (retailers/distributors), while waiting longer for client payments, creates a squeeze. Without tools like invoice discounting or supply-chain finance, many firms struggle to balance routine expenses.

For MSMEs, steel volatility is not just a market story – it cuts through procurement, operations, and finance. That is why smarter buying strategies are no longer optional but necessary.
Also read: What is Sariya? Explore its Grades, Applications, and Prices

Procurement playbook – buy smarter when prices move

Price swings are now a routine part of steel buying. MSMEs cannot control the market, but they can change how they buy. A clear playbook helps firms cut exposure and avoid last-minute shocks.

Spot versus contract supply

Buying from the spot market is quick but unpredictable. When prices climb sharply, small firms with thin margins absorb the loss. Contract supply, even for three months, offers more stability. In several state housing projects this year, contractors with basic escalation clauses in their supply agreements were able to deliver on time, while those tied to weekly purchases ran into cost overruns.

Building stronger supplier relations

Reliable supply often depends less on the market and more on the partner. MSMEs that track suppliers on delivery record, payment terms and willingness to hold stock gain an advantage. Even a simple checklist helps identify which stockists stand firm during shortages and which ones keep changing terms.

Writing clear RFQs

A well-drafted RFQ can prevent later disputes. Stating delivery deadlines, acceptable price-revision bands and penalties for late supply gives buyers more certainty. Clear terms reduce the need for renegotiation mid-project.

For smaller firms, buying smarter does not mean predicting the market. It means locking in reasonable terms, tracking supplier behaviour, and avoiding sudden shocks in cost and delivery.

Conclusion

In an ever-changing market, factors affecting steel prices continue to shape the industry’s pricing trends and profitability. The interplay of raw material costs, production challenges, economic conditions, and international trade policies drives price variations, impacting manufacturers and consumers alike.

Apart from it, the year 2025 has shown that steel prices can shift faster than many MSMEs can react. The last quarter is the time to put discipline into buying. A contract with a clear escalation clause, a second supplier lined up, and paperwork checked before tender submission are not big tasks – but they prevent heavy losses when prices jump.

The market is unlikely to turn stable in early 2026. Government projects, global trade tensions and tighter standards will keep demand and compliance pressures high. Firms that end this year with organised supply terms and a written playbook will cope better with what comes next.

For MSMEs, the message is direct: treat procurement as planned work, not an afterthought. Preparation now will decide whether projects run smoothly or face avoidable cost and delivery shocks in the months ahead.

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