Many industries slowed or even stopped the production of their products during the COVID-19 pandemic. The steel industry is no different, and with a continued supply shortage problem, there’s no clear indication of when the cost of steel will go back down.
As a company that heavily produces steel products, American Manufacturing is constantly monitoring the steel market. Although it’s challenging to predict the steel price forecast for the last half of 2021 into 2022, American Manufacturing is working to keep costs low for customers.
What Determines Steel Prices?
Like most products, steel price changes are mainly determined by supply and demand. The current supply of steel is low, so the cost is a lot higher than usual. But supply and demand also affect the forecasted price of steel since steel producers will keep prices high if they see that the demand will increase.
Other factors that determine steel prices include:
- Industry trends: When businesses and companies are strong, they have a higher demand for steel, which drives the price up, especially when quantities are limited.
- Cost of production materials: Steel fabrication is a complicated process that involves experience and proper technique. Steel is made from scrap metal and iron that is burned, formed, and welded. If these resources are limited, steel prices increase. Energy costs can also contribute to this since it takes a lot of heat to melt steel.
- Freight costs: Both materials to make steel and the finished goods are costly to ship. Shipping can become expensive, and the cost of labor and fuel are also high. If you order anything metal or steel to be delivered, it will make the product more expensive.
- Time of year: Output of products like steel can be affected by holidays, weather, and seasonal highs and lows in demand. Seasons can also impact shipping patterns and transit modes, making shipping more expensive.
Why Is the Cost of Steel so High Right Now?
The price of steel began to increase steadily in 2018 when a 25 percent tariff was placed on steel imports. Since then, other factors have contributed to the high prices, such as the COVID-19 pandemic, which is still impacting supply chains internationally.
The pandemic slowed and even stopped steel production altogether. Steel mills idled furnaces and stopped production instead of risking any uncertainty related to the pandemic. This created a supply shortage, causing the price of steel to increase drastically.
As steel production has started up again in 2021, many steel mills have also raised prices to take advantage of the shortage. There’s been a resurgence in demand, but raw materials and steel inventories are both still low. With the constantly changing demand, it’s natural for steel prices to fluctuate accordingly.
How Will Rising Steel Prices Affect Your Business?
There are many ways that rising steel prices can affect your business. Being aware of these effects can help prepare you to make the best decisions for your company.
- Unexpected expenses: While the increase in steel costs doesn’t necessarily mean that business will be slower, there is the risk of unexpected expenses arising for your business. You may be spending more money if you need a lot of steel. These expenses can include equipment costs, insurance fees, payroll expenses, and taxes.
- Unhappy clients: Higher steel prices mean higher costs for customers. Product delays can also lose customer satisfaction, especially if projects can’t be completed on time.
- Cash flow problems: You may lose out on certain projects and customers if your business can’t shell out the additional cash for supplies. Business lines of credit are an additional source for financing as they give you the flexibility of having cash available and can even help you save money.
How Do Steel Prices Affect American Manufacturing?
With our extensive range of steel products like steel pallets and containers, steel prices can largely affect us here at American Manufacturing. While we are working to keep costs low for customers, you may see an increase in the pricing of some of our products.
The Importance of Keeping Steel Costs Low for Customers
We understand that finding the right steel product for your business is important, and you want something effective and affordable. There are many benefits of our steel pallets and other products that we provide to our customers.
We negotiate with our suppliers and may consider alternate fabrication options to bring our customers a lower price. We also take special care in calculating any transportation cost to ensure that you are getting the lowest price that we can offer.
Unfortunately, with the current steel price forecast, it is difficult to avoid the rising costs of metal products completely.
Will Steel Prices Ever Go Back Down?
It’s hard to say when steel prices will go down. Economic growth in the United States has caused prices to continue to climb as steel demand increases. Supply is expected to increase in 2021, but the timeline for that is uncertain. Steel mills will also continue to determine steel prices by the profit margin they seek.
At American Manufacturing, our industry knowledge and experience enables us to produce a line of high-quality products and services. We specialize in the high volume production of standard steel containers and many other products like industrial shipping racks and steel shipping pallets. We always work to minimize the cost for our customers. For more information, contact us today at 419-531-9471