In the 20th century, steel made in America forged the American manufacturing empire.
But now, the price of steel itself is forging a 21st century chain reaction.
We want to advise our clients and partners how to proceed in a new market with steel prices at an all-time high and explain why this change has come to be.
Due to the global COVID-19 pandemic, U.S. Steel production fell by 17.2% and global crude steel production fell by 0.9% in 2020. With the looming economic shutdown last March, auto and appliance factories closed driving down demand for steel.
In response, steel manufacturers shut down the steel mills to reduce capacity. But then American factories went back to work. This is where the balance of supply and demand broke down – because the steel mill furnaces were stopped to cut costs and mills couldn’t boot them back up fast enough to meet demand when “essential” work returned a month later, the demand outpaced the supply.
Exacerbating the issue even further, tariffs on Chinese, Russian and Brazilian imports ramped up the cost of raw materials. The expense spiral continues – even scrap steel is skyrocketing.
With supply and demand so out of sync, there’s simply more need than inventory. Costs have nearly doubled since August of last year. Sadly, this means there’s a price increase coming for every industry connected to steel, across the manufacturing and contracting world.
We’re keeping our prices locked until the end of the first quarter, 2021. After that however, it may become too costly for your customers to proceed with projects. Nor can we universally guarantee there will be enough steel to complete projects at our typical rapid pace and reasonable cost.
Because we value trust and transparency with our clients and partners above all else, our advice is to order now, when you can still get steel for a steal. If you don’t believe you can complete a contract in Q1, you need to inform your customer that price and delivery are not locked in and will be negatively impacted by delaying their decision. Reiterate to your clients that that it could be up to a year before the volatility begins to stabilize under new supply and new administration.
We’ve been around for over 140 years, so we’ve seen stocks and steel rise and fall and rise again.
Steel yourselves. We’ll get through this, and Richards-Wilcox always finds a way for our customers.