As many of you may be aware, steel prices are rising. U.S. domestic steel mills have been implementing price increases since the end of 2017 for the steel D&M Metal Products uses to produce parts. Up until now these increases have been within a somewhat reasonable range, but the price increases that have been implemented for March are now so high that we are unable to hold our current pricing.
Why Are Steel Prices So High Now?
There are a number of reasons for the price increases. As is so often the case with economics, they can be explained by lowered supply and increased demand.
U.S. steel output has been lower in recent years. Domestic steel producers have struggled to compete with foreign steel mills - especially Chinese mills - that have ramped up production and sold steel at lower prices. Foreign steel makes up about 25 percent of U.S. consumption.
A strong U.S. economy and a rebounding oil and gas industry have meant there is a greater demand for steel overall. This is why steel prices are already higher than they have been in recent years. Currently supply is tight and there is low warehouse inventory of steel. With less steel available but more demand for it, U.S. mills are in a stronger position to force material increase onto industrial manufacturers.
An Unpredictable Future
Additionally, President Trump’s recent announcement of his intention to impose tariffs on imported steel and aluminum has caused further uncertainty about the price of steel going forward. Tariffs of 25 percent on foreign steel will, of course, drive prices upward, but it’s unclear which countries will be subject to the tariff. Mexico and Canada will be temporarily exempt, but no one knows for how long.
Already some U.S. steel mills have begun the process of firing up their blast furnaces in order to restart production. Greater production will have a dampening effect on price, but that process can take a long time. In the interim, there may be considerable fluctuation in the price of steel. In the near term we at D&M Metal do not see any stabilization in the pricing of steel.
How does this affect you, our customers? For purchase orders which we have open and have material purchased, D&M Metal will honor the pricing that is in place. We will need to review pricing as new orders or releases come in and may need to make adjustments based on our inventories for your specific products. It will be more challenging to provide you the information you will need to adjust your product cost when the market is constantly adjusting. We will do our best to be as fair as possible.
This is not the type of news that anyone wants to hear, but be assured that we appreciate your business and will work to be as competitive and responsive as we can. If you have any immediate questions, please call D&M Metal Products’ president, Bob Buist. He will be happy to talk to you about your concerns.