US Steel Costs Soar, Manufacturers Grapple With Shortages
Updated 8/16/2023
Pricing Forecast for the Steel Industry
Steel is vital across various industrial markets, from construction and automaking to heavy equipment manufacturing and durable consumer items. Hot-rolled coil (HRC) is among the most critical drivers for the United States economy, as many experts watch current pricing levels to help make general economic forecasts.
After steel prices skyrocketed during COVID-19 and the wave of supply chain shortages that resulted from its effects, they gradually fell throughout 2022, decreasing nearly 12% by year’s end. However, persistent inflation and high interest rates have seen prices rise in 2023 despite relatively stable global demand.
Factors That Influence Steel Prices
At Summit Steel, we continuously monitor the steel market since metals represent the highest portion of our raw material costs. Price changes often affect the entire supply chain, including producers, shipping companies, consumers, and end users. Analyzing the market means paying attention to crucial factors like:
Supply and demand: Global supply and demand is one of the most significant factors affecting steel prices. When supply is low and demand is high, the price goes up. Prices typically fall when the supply is high and market demand is low.
Raw material costs: Because iron and scrap metal are two of steel’s primary elements, their current prices often significantly contribute to the overall cost of steel. In addition, energy costs and expenses for plating materials can affect steel’s general pricing.
Steel tariffs and trade policies: Even when demand is low, international tariffs and trade policies can significantly impact the cost of steel. In recent years, tariffs on U.S. imports have risen as high as 25%.
Technological advancements: Thanks to advanced tools and innovative manufacturing processes, steel production has become more cost- and labor-efficient than ever. New advances and trends toward energy efficiency and sustainability can improve the market even more.
Current Market
Forecasts from the World Steel Association show estimations in demand up to 2.3% for the remainder of 2023 and 1.7% in 2024. Although manufacturing will likely lead the global recovery, high interest rates could result in continued price fluctuations. Although normalization in China could stabilize growth across Asia in 2024, growth should accelerate in other regions.
Mid-August saw a significant dip in the steel market as it was the lowest it had been in over two months. Concerns over China’s economy contributed to this dip as their outlook on the demand for construction in 2023 was considerably lower than originally expected. While growth is expected to grow in other regions, China is a big player in the game. Knowing this, we can expect the price of steel to remain stagnant going into 2024 and could even see some drops looking 12 months into the future. This is definitely something to keep an eye on and market trends are a great way to do that.
Market Trends to Watch
Over the next decade, three primary factors could shape the steel industry, including:
Several forecasts indicate a slowdown in global steel demand across various industries and countries, mainly from the normalization trends in China.
Companies worldwide will ramp up decarbonization, causing a period of potentially spiked costs.
Economies will likely continue to experience supply chain disruptions based on international relations, transportation and energy costs, tariffs, and raw material pricing.
Responding to these trends will require producers to make many challenging decisions due to the uncertainty regarding banks, suppliers, and raw material vendors.
Let Summit Steel Help You Reduce End Costs and Lead Times
Since 1992, Summit Steel has been dedicated to delivering exceptional value to our clients, implementing the latest technologies to optimize our products’ quality and efficiency. Our metalworking services add value to various industries and applications, and our staff offers a high level of sheet metal fabrication engineering skills that will exceed your expectations.
As an ISO-certified metal fabrication company, Summit Steel brings a high level of expertise to your business, whether you work in construction, consumer electronics, household appliance manufacturing, automotive, or another industry.
Reach out to us online for a quote or to learn more about our services today.
Brian Reed is the Vice President of Sales and Business Development at Summit Steel & Manufacturing Inc.