Several years ago, we sent out a letter to our customers about how the new U.S. tariffs on imported steel and aluminum would affect the price of steel and our prices going forward. As you might imagine, 2020 created quite a lot of economic chaos for companies given the complications of COVID-19, the lockdowns, shortages of products and raw materials, and worldwide shipping issues. Since that time, the price of steel has fluctuated, but it’s risen again and availability may be affected as well. D&M Metal Products sets the prices for the products we produce based on costs of labor and raw materials. Unfortunately, when those prices increase, our current pricing must as well.
The Price of Steel Is Increasing
The price of all types of steel increased from November to December of 2020 with the month-over-month price for hot-rolled steel up $6.65 cwt, cold-rolled steel up $6.05 cwt, galvanized steel up $6.50 cwt and plate steel up $4.00 cwt. It increased again from mid-December to the end of December. The largest increase in steel prices, however, was the change from August of 2020 when steel prices were at their lowest. Hot-rolled steel increased $20.40 cwt from August to December, with cold-rolled steel up $18.90 cwt, galvanized steel up $20.10 cwt, and plate steel up $9.25 cwt.
Even at those increased prices, steel is becoming harder to acquire. In April of 2020, there was a lead time of 3-4 weeks for hot-rolled steel. By December, that lead time was 9-11 weeks. This is the longest lead time for almost a decade.
There are a number of reasons for this. The steel industry was also affected by COVID-19. Mills are typically running 2-6 weeks late due to labor shortages, labor strikes, and cyber attacks. Their inventories of steel are currently very low, and increased demand for steel has resulted in the highest prices for hot-rolled steel since August of 2008.
The market for steel looks to continue to be tight through at least the first quarter of 2021. Mills are trying to meet increased demand coming from different industries and playing catch up due to downtime or other problems earlier in the year. Steel imports are at lowest levels in 10 years.
The availability of aluminum is also a problem. The U.S. Department of Commerce placed new tariffs on aluminum in October, so that had an effect. Currently, the lead times for aluminum are 8-12 weeks for common alloy. Base prices have increased two times since the beginning of September. There are constraints across the industry. Getting wide-stock aluminum is a challenge, and the availability of .160 and thicker aluminum is limited.
The lumber market also had a roller coaster of a year in 2020 with prices reaching historic highs in the summer and then dropping lower in the fall. However, the price of lumber has begun to increase again in the past month. The instability in the market was caused by numerous things, including COVID-19, tariffs with Canada, wildfires, and hurricanes.
As you might expect, it’s a challenge for anyone to accurately predict what might happen with prices on raw materials in 2021, given complications with the pandemic, trade, the economy, and politics in the short term. We want to be as transparent with our customers as we can. For open purchase orders for which we’ve already purchased material, D&M Metal will honor the pricing that is in place. We will need to review pricing as new orders or releases come in. We may need to make adjustments based on our inventories for your specific products. We will do our best to be as fair as possible when we price out costs based on changing prices for materials.
We do appreciate your business and will work to be as competitive and responsive as we can. If you have any immediate questions, please call Bob Buist, D&M Metal Products’ president. He will be happy to talk to you about your concerns.