Why Steel’s Value Is Still Rising and When Will the Climb Stop?
Steel prices have gone up by 215% since March 2020, affecting a wide spectrum of industries that rely on the omnipresent and extremely versatile metal alloy. As companies deal with shortages and price hikes from their suppliers, goods cost more to manufacture, and this rise in price is trickled down to the consumer.
Simply put, the reason for the situation is the pandemic and the shutdowns that took place during Q1 and Q2 of 2020 across the larger parts of the planet. As steel mills were getting colder though, consumer demand on products such as grills, refrigerators, lawn mowers, and appliances of all kinds suddenly spiked, as people got bored and spent their money on things, not being able to spend it on experiences anyway.
Steel supplies grew short quickly, and before most mills had the chance to restart production and restock their depleted warehouses, the global economy reopened as vaccines became available much sooner than what was initially anticipated. So, right now, steel makers are playing a catch-up game with the growing demand that’s fueled by the recovery. The same applies to copper, aluminum, and all other metals found inside electronics and electrical products, all scoring historical price records.
On the question of when this situation will turn the other way around, industry experts state that they don’t believe we’ve hit the peak for steel prices yet. For most analysts, it is certain that the market will begin stabilizing by 2022, although nobody can provide accurate estimates due to the ubiquity of the material that makes its market dynamics so hard to predict. There are just so many things that can affect the conditions of the particular market, making all guesses long-shots.
And finally, the steel industry entered a duopoly thanks to two major acquisitions that took place last year, turning the market into a “fixed” one. The two entities, U.S. Steel Corporation and Cleveland-Cliffs, have no real incentive to increase their production any time soon, as they’re already enjoying maximum profits thanks to the current state of affairs.
Tech Steel & Materials