Steel Prices Reaching Record Highs: What you need to know

The steel economy has been steadily climbing upwards with rising prices since early 2020. The worldwide construction halt during COVID-19 was the first hit to prices. It left many companies out of work and questioning when the waiting game would come to an end. This was closely followed by rising inflation rates that showed no mercy to the skyrocketing prices. Industry leaders still showed hopes that these trends would turn downward however when Russia invaded Ukraine these hopes were dashed. The conflict has had serious effects on the prices of steel and energy. With no end in sight, companies throughout the supply chain are raising their prices to accommodate for the hikes which is leaving the end consumer footing the bill.

The COVID-19 pandemic led to a shift in the global economy on many levels. This was especially true for the importing and exporting of steel and metal ores used in steel production. There was a sharp fall in prices at the beginning of the pandemic that was caused by a halt in construction and other industrial production. This was followed by increases in prices as production began again but ore production and distribution processes stayed shut down or ran in a limited capacity.

Russia and Ukraine were among the top suppliers of pig iron which is a type of iron ore used to make steel. These two countries produce over two-thirds of the ore used in the United States. The metal has grown scarce since Russia invaded Ukraine due to the freeze in production in Ukraine and the unwillingness of industry leaders to buy from Russia given the current global backlash facing the country. The availability of materials has pushed prices to record highs.

Steel production in the US is heavily reliant on these forms of metal to melt for new steel. There is little to no infrastructure in the US for domestic production. This has left leaders looking to countries such as India and Brazil for scrap metals and pig iron to fulfill the demand. These countries are not set up to handle the worldwide demand and have been unable to fill the gaps left by Russia and Ukraine. Globally the steel economy is reaching high prices because the demand is higher than ever with fewer suppliers.

2021 saw increases of up to 20% for ore imports as the demand for steel products grew.

The US index of steel in August had doubled since the previous fall which is the highest spike since 1920 when the index was created. While the steel prices rising is a cause for concern itself, it is just one of the metals that are in short supply. Aluminum prices are reaching heights not seen in the past 10 years. This is a drastic difference from the low costs seen during the pandemic when construction and engineering industries halted projects causing low demand.

At the start of the pandemic aluminum could be found up to 80% cheaper than the current market price.

The steel prices come at a time when labor shortages and market hurdles have already caused product shortages. The tightening of purse strings is taking place outside of the steel market as companies increase wages and deal with the economic stress that continues post-pandemic. The labor market has seen living wages increase to entice workers into positions as the employer’s fight to keep employees. This has left new products, projects, and repairs to take a backseat because companies simply cannot afford the extra expenses.

Welding and construction companies are among the industries hit hardest by the steel price hikes. These companies are working harder than ever to fill skilled trade jobs and struggling to keep consumer prices reasonable when the production cost has gone so high. The current shortages have left the industry swinging in the balance as the leading producers battle in the west.

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