We have blogged several times before about rising steel prices and how they affect the cost of metal fabrication. Unfortunately, the trajectory for steel would seem only to be going up in the near future, even into 2022. It looks like higher costs will be here to stay for some time.
Prices on Steel are Up, Up, Up
Fortune Magazine this month reported that steel prices have risen 215% just since March of 2020. As of today, hot-rolled steel is up to an all-time high of $1,888. Before the COVID-19 pandemic, the price was in the $500-800 range. We are seeing rampant inflation across the board on many goods. Why is this happening with steel specifically?
Steel is not the only commodity to experience sudden price spikes. Lumber has too. Both of these price spikes were related to COVID. During the lockdowns, many people, unable to travel, eat out, or enjoy entertainment, decided to spruce up their home with renovations, building projects, or new appliance purchases. When demand increases but supply stays the same or decreases, you will see these types of price spikes.
Steel mills shut down production in early 2020 because they were pessimistic about the economy. Steel is used across industry sectors. Manufacturing remained busy producing consumer goods during the pandemic, including medical equipment. Now that the economy is ramping up and people are traveling for work and relaxation again, the demand for steel will only increase. Steel mills were unprepared and slow to act on these trends.
Additionally, there has been consolidation within the steel industry. Higher prices for steel only benefit steel producers, so they do not have an incentive to ramp up production to 2019 levels again. Lack of competition means they don’t have to. They can essentially charge what they like because there is no alternative. They are already backlogged, in fact, on summer orders.
For these reasons, we predict that rising steel prices will continue for some time, even into 2022. The steel shortages are affecting manufacturers across the board who all need it to keep production going. We all need a steady supply.
As a company that cares about our customers, we at D+M Metal Products want to be open with you about the challenges we face so that we do not disappoint your expectations. Currently with the price fluctuating, we review pricing as new orders or releases come in and must make adjustments based on our inventories for your specific products. We are doing our best to be as fair as possible with our customers.
If you have any questions about rising steel prices, pricing in general, or how this will affect your products, please call us. We will be happy to discuss your concerns with you and come to the best solution we can for your project.