Steel has evolved to become a basic raw material in the production of various goods. It is widely used in the construction industry. In this way, this metal has been highly dominant in the economic world, since it helps in economic development. Steel is one of the non-renewable raw materials, found in the world in the form of ores. Different processes have ensured that iron ores can be transferred to become into steel. These days, China is one of the largest producers of steel, and it is the major consumer of steel. The production and consumption of steel shows the economic prosperity and progress of a particular country. India is on its way on becoming the largest producer, while United States and Europe have been dominating the market since quite a long time. Because of increasing industrialization all around the world, the demand for steel has significantly increased. The article attempts to serve as a beginner’s guide into the economics of the industry of this particular metal.

The extraction of iron ores from the ground in remote areas is quite an exhausting and expensive task. Moreover, the process of transferring is also very difficult and costly. However, the least costly method to make steel is to use metal scraps. However, this type will be low quality. Electric arc furnaces are used to convert metal ores into steel. Some of these furnaces are gigantic enough to produce 400 tons of steel at any one time.

Because of the increase in the demand for this raw material, steel prices have considerably increased in the past decade. This is because of the state of emerging economies. Moreover, there have been shortages in the production lines as well, which have again contributed to the increasing prices. Steel prices generally vary according to the type of steel, which may include hot rolled coil, hot rolled plate, cold rolled coil and wire rod among others. In the current year, 2011, steel prices on average have risen.

Moreover, the steel scrap industry has also shown an increase in the amount of production and consumption. Scrap is any recyclable material, which is actually not waste, but it can be used for further production. US, for example has become the world’s largest exporter for scrap steel. Scrap recycling also has environmental benefits, as every type of recycling does. The steel scrap prices are also determined by the interaction of demand and supply and it has been noticed by economic experts that metal prices determine the price of scraps. In addition, the scraps are usually at a higher price at the start of year, because industries increase production, while they are quite low at the other half of the year.

However, there is always a steel cycle. This is why economists find it hard to predict steel prices, which are quite uneven. However, the chances are that these prices will continue to increase, so will the steel scrap prices, because of different emerging economies all around the world, especially in different parts of Asia and Latin America. This raw material is the driving force of a multiple of industries.

Author's Bio: is providing steel news update and trends analysis of steel price index provided by the Steel Market Update Newsletter.