If you’ve noticed how the prices of cars, appliances and construction are going up, the reason is simple: steel prices are skyrocketing right now. Since the beginning of the COVID-19 pandemic, disruption to the supply chain has caused steel fabrication costs to go up 215 percent. Even though steel mills closed down in the early days of the pandemic, the demand for steel did not drop off. In fact, it increased, as more people sought to remodel their homes, buy new appliances and more.
Supply and demand in action
You may have seen the way lumber prices rose sharply, then started to fall as the country reopened. Lumber is another hot construction commodity whose supply chain was disrupted. Now, as the demand for construction is starting to go down and production is up, lumber prices are self-correcting. They peaked at 300 percent of normal on May 28, 2021, and have since gone down 49 percent. Experts expect that they will continue to go down in the future.
Unfortunately, steel is not self-correcting in the same way. Prices have hit 215 percent of normal, and there’s no indication that they’ll start dropping back down anytime soon.
Why aren’t steel costs going down?
Even though home remodeling and buying new appliances have slowed down—and the steel industry has surely felt it—the spike in demand isn’t over yet. In fact, experts have predicted that we haven’t seen the peak of the demand yet. But why?
While home construction and appliance sales have slowed, the oil and gas industry are experiencing spikes in demand. Since this is a very steel-heavy business, the demand for steel fabrication has caused costs to soar. Other steel-heavy industries, such as transportation, are also starting to see larger demand for steel products.
The supply is tight, and fabricators are struggling to source more material. That means you shouldn’t expect to see the cost of steel going down until sometime in 2022, at the earliest.
Another reason costs aren’t leveling out is consolidation. The United States has just two major steel corporations, thanks to some large acquisitions recently. With only two companies in charge of most of the country’s steel production, there’s no reason for them to lower their prices. After all, they’re making more money this way.
Finally, the automotive industry will surely see an increased supply for steel in the coming year. Now that the electronic chip shortage is leveling out, car manufacturers are going to need more steel parts as they ramp up production.
If you’ve been trying to fabricate steel products, it’s important to recognize that the prices will continue to soar throughout the fourth quarter of 2021. While they may abate in 2022, expect to pay a premium when it comes to steel fabrication costs for the time being.
When you’re looking for a high-quality steel fabricator, Metal Pro Inc. is here to help. Our team can perform a number of different fabrication services, from cutting to welding. Call us today to get started.