Steel is a metal composed of iron and carbon as the main materials. The metal can also include small quantities of manganese, silicon, sulphur, oxygen, chromium, and phosphorus, depending on the desired properties of the specific type of steel.
Quick Overview of Steel
✔️An overview of steel
✔️The production of steel
✔️Trading steel as a commodity
What factors drive the price of steel as a commodity?
Main applications of steel
Did you know?
An overview of steel
What is steel?
Concerning the two main components of steel:
- Iron is obtained from iron ore deposits in the crust of the Earth. It is one of the most abundant metals, constituting approximately 5 percent of the Earth’s crust. Approximately 98 percent of iron globally produced is used in the manufacturing of steel.
Iron is indicated with the chemical symbol ‘Fe,’ an abbreviation deriving from the Latin for iron, namely ‘ferrum.
- Carbon is a nonmetallic chemical element that easily forms compounds with numerous other elements. As an alloy, steel contains less than 2 percent carbon, usually varying between 0.1 – 1.7 percent.
Properties of steel
- Steel is a ferrous metal, implying it primarily consists of iron.
- It has a shiny silvery colour.
- Steel is extremely strong, roughly 1 000 times stronger than iron.
- It is a durable
- Steel is a high-elasticity metal. Encyclopaedia Britannica defines elasticity as the ‘ability of a deformed material to return to its original shape and size when the forces causing the deformation are removed.’
- It is extremely flexible.
- Steel is known for its high tensile strength, meaning it is able to withstand applied forces, without losing its form.
- It is an extremely dense material, with a density of 7.85 g/cm3, about eight times that of water.
- The metal has low thermal conductivity.
Types of steel
There are numerous types of steel that are categorised into different categories in terms of different criteria, such as chemical composition, manufacturing process, smelting methods, and applications.
Based on chemical composition, steel can be classified into two major groups: carbon steel and alloy steel.
- Carbon steel
Carbon steel accounts for approximately 90 percent of global steel production. It is an iron-carbon alloy that is sub-divided into ultra-high carbon steel (carbon content of 1.25 – 2.00 percent), high carbon steel (comprised of carbon of 0.60 – 1.25 percent), medium carbon steel (includes carbon content of 0.25 – 0.60 percent), low carbon steel, also referred to as iron or mild steel (carbon content of 0.04 – 0.25 percent).
Also, carbon steel is defined as having certain amounts of the following impurity elements: manganese (less than 1.65 percent), silicon (less than 0.60 percent), and copper (less than 0.60 percent). The total of these other elements must not exceed 2 percent.
- Alloy steel
Alloy steel refers to a type of steel that comprises iron and other alloying elements besides carbon, improving the properties of the steel. Alloying elements include, inter alia, aluminium, chromium, nickel, molybdenum, tungsten, vanadium, titanium, selenium, and copper.
Alloy steel consists of the following types of steel: low alloy steel (number of alloying elements is equal to or less than 5 percent), medium alloy steel (quantity of alloying elements is 5 – 10 percent), high alloy steel (total mass fraction of alloying elements is more than 10 percent).
Based on the type of alloying elements, alloy steel can be classified into, amongst others, the following categories: stainless steel, chrome steel, manganese steel, chrome nickel steel, and silicon manganese steel.
Birth of the modern steel industry
ThoughtCo. is of the opinion that the modern steel industry was born in 1856 when the English inventor, Henry Bessemer (1813 – 1898), developed an effective method to use oxygen to reduce the carbon content in iron.
Described as a major breakthrough in the history of steel, the Bessemer Process, is explained as follows by ThoughtCo: ‘Bessemer designed a pear-shaped receptacle, referred to as a ‘converter’ in which iron could be heated while oxygen could be blown through the molten metal. As oxygen passed through the molten metal, it would react with the carbon, releasing carbon dioxide and producing a pure iron.’
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The production of steel
Which country produces the most steel?
In 2025, China was by far the major global producer of steel, producing 1 032.8 million tonnes of steel. China was followed by India (118.10 million tonnes), Japan, USA, Russia, South Korea, Türkiye (formerly known as Turkey), Germany, Brazil, and Iran (an estimated 28.5 million tonnes).
China produced 914.7 million tonnes of steel more than India, the second-ranked country. In terms of percentage, this is a staggering 774.5 percent more. In fact, China’s steel production in 2025 was 440.8 million tonnes more than the combined steel production of the remaining nine countries in the list of the top ten of steel-producing countries.
How is steel produced?
Steel is produced in furnaces using primarily two methods, namely the blast furnace-basic oxygen furnace (BF-BOF) method and the electric arc furnace (EAF) process.
- Blast furnace-basic oxygen furnace (BF-BOF) method
In the BF-BOF method, raw materials like iron ores and coal are used. Firstly, iron ores are reduced to iron, also referred to as hot metal or pig iron. Subsequently, the iron is converted to steel in the blast furnaces.
The next step is to cast and roll the steel, which is finally delivered as coils, plates, sections, or bars.
Concerning the rolling and casting of the steel, the following terms are used:
- Hot rolled steel is a type of steel that is typically used to manufacture steel pipes, profile steel, steel plate, and wire. Most of the steel produced is hot rolled.
- Cold-rolled steel has the features of a smooth surface and accurate size. It is a type of steel that is normally used to roll steel strips and thin sheets of steel.
- Cast steel refers to steel casting with weak casting properties. Hence, steel castings usually require heat treatment and alloying to enhance their properties and structure. Cast steel is mostly used to produce parts that are complex in shape, difficult to be physically shaped or cut, and require more strength and plasticity.
It is estimated that the BF-BOF method accounts for approximately 70 – 75 percent of the world’s steel production.
- Electric arc furnace (EAF) process
In the EAF process, electricity is used to melt recycled steel. When needed, alloys of metallic iron are used to obtain the desired chemical composition. Also, electricity can be supplemented with oxygen injected into the electric arc furnace.
Similar to the BF-BOF method, casting and rolling of the steel is applied. About 25 – 30 percent of the world’s steel is produced via this method.
Global steel demand is met by using both methods described above. There is not enough recycled steel available to meet the growing global demand by using only the electric arc furnace method.
Although, most new steel nowadays produced contains recycled steel.
Trading steel as a commodity
There are various financial instruments available to trade steel as a commodity. These instruments include steel exchange-traded funds (ETFs), steel futures contracts, steel contracts for difference (CFDs), steel options on futures, and shares of publicly traded companies that are engaged in the mining and processing of iron ore or production of steel.
Trading with these types of instruments requires a trader or investor to use a trading platform of a regulated and trusted commodity broker like AvaTrade.
What factors drive the price of steel as a commodity?
Similar to other commodities, there are various factors affecting the price of steel. These factors are, amongst others, the following:
- Supply and demand
Simply put, the law of supply and demand implies the more there is, the less it costs, and the less there is, the more it costs. This is especially true for the steel market where China is the major role player. What happens in China – economically and politically – has an effect on the price of steel, positively or negatively.
The extent of Infrastructure projects in countries also influences the price of the metal.
- Different types of costs
There are numerous costs involved in the production of steel. For example, material costs regarding recycled steel and iron ore, labour costs, energy costs, and transport and shipping costs. Fluctuations in these costs will affect the steel price.
- Fluctuations in currencies
The strength of the US dollar is a key factor in the price of steel. A weak South African Rand against the dollar means a higher price for steel for consumers of steel in South Africa. Fortunately, the opposite is also true.
Main applications of steel
Steel is one of the most important metals used globally in construction and infrastructure projects such as high-rise buildings, bridges, and railway lines, to name a few.
Analysts estimate that steel used in construction and infrastructure, commonly called structural steel, accounts for approximately 50 percent of the annual global production of metal.
In terms of applications, steel can further be classified into, amongst others, the following categories:
- Electrical steel, including connector and component brackets.
- Die steel, refers to steel used in making tools for cutting and machining.
- Marine grade stainless steel also referred to as 316 stainless steel, is known for its high level of corrosion resistance and toughness.
- Bearing steel consists of features such as high hardness, high wear resistance, and rolling fatigue strength, making it specially adapted for roll bearings.
- Spring steel has the ability to withstand considerable twisting and bending forces without distortion, allowing it to be used in springs, saw blades, and swords.
- Boiler steel and pressure vessel steel refer to a group of steels that is used for the manufacture of boilers and pressure vessels.
- Valve steel is a type of steel that is precipitation hardenable, providing excellent resistance to corrosion, even at high temperatures. In addition, valve steels provide outstanding resistance to wear and mechanical and thermal shocks. It is used in a variety of values such as globe, gate, and check valves.
- Free-cutting steels, also called free-machining steels, are those steels that form chips when machined. They are typically used in the automotive industry and in household appliances.
- Cold heading steel (or cold forming) is manufactured in a process of continuously forming a specific shape from sheet wire without adding heat. It is the raw material that is used to make fasteners like screws, nuts, bolts, nails, and rivets, to name a few.
- Abrasion-resistant steel, also known as wear-resistant steel, is a high-carbon steel with features of increased toughness and hardness. It is best suited for applications subjected to high wear and tear. It is typically used in the mining and construction industries which use equipment that carries large-scale materials.
Abrasion-resistant steels are usually applied as a liner to protect more permanent structures from wear and tear. Uses include:
- Liners for digging equipment and dump trucks in the mining industry.
- Conveyor belts are used to move different types of material, such as crushed rocks.
- Liners for bins and chutes which are used in the cement or mining industry.
Did you know?
- Steel can be recycled for up to 150 years after it is first manufactured.
- The Golden Gate Bridge, spanning the strait connecting San Francisco Bay and the Pacific Ocean, was built with 83 000 tonnes of steel in the early 1930s. Nowadays, only half of the steel would be required due to improved properties and construction methods.
Note: This article does not constitute investment, financial, or trading advice. Please obtain the advice of a professional and regulated commodity broker before making trading and investment decisions.
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