Steel Model

BCG’s Steel Model tracks the entire value chain from steel demand to raw materials in order to uncover key drivers in the market.

BCG’s Steel Model helps companies answer important questions such as: How will steel demand develop globally and regionally, and from where will supply come? How will raw materials markets develop and react to demand and production changes?

BCG models steel demand in two ways: top-down and bottom-up. The top-down approach is based on a calculated steel intensity, or SI curve, that measures the amount of steel used per unit of a country’s overall GDP. The “bottom up” approach bases steel demand projections on production forecasts and other data from steel-using industries such as construction, automotive, and machinery manufacturers. That’s helpful especially for short-range outlooks.

Historical data demonstrates that the SI curve follows a distinctive path as an economy develops based on population and GDP growth, and the relative importance of steel-using sectors in an economy. Steel intensity rises until the region’s infrastructure is fully built out, and then drops when the region shifts to a more consumption-driven economy. This pattern has—in our view—significantly better predictive power than most "per capita" based models.

BCG has developed an analytical process that factors in both SI curve and GDP projections in order to yield an informed forecast of finished steel consumption.

BCG’s Steel Model has demonstrated strong reliability against actual results, with deviations around 2% in recent years. The model foresees more growth on the horizon, with worldwide steel demand growing about 1.7% annually to 1.8 billion tons in 2024.

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