What You Need to Know About the Increasing Cost of Steel
Steel prices, like many other materials, have seen an increase in recent months. An increase in the cost of raw materials, a decrease in production capability, and an increase in demand have all combined to send prices high. Steel has been as vulnerable as other industries to the pandemic economy, and industries that rely on steel need to know how to respond.
What is Driving the High Cost of Steel?
What is ultimately driving the high cost of steel is low supply and high demand. During the initial stages of the pandemic, many steel mills were not able to maintain production at their normal levels. During the uncertainty of the initial shutdown, steel mills needed to curtail production rather than risking production during that time. While their production was down, they used the inventory they had built up to fulfill orders. This depleted inventory levels, and although steel mills are working hard to increase production to bring supply levels back to pre-pandemic levels, it will take some time to catch up. In addition to the decrease in production, there has been a surge in demand throughout 2020 which is still continuing well into 2021. Steel mills are doing what is necessary to make sure they are still producing a quality product and not cutting corners just to meet the demand.
In addition, there are other factors in play. Current tariffs are keeping foreign supply low. Projections indicate that these tariffs will remain in place, so foreign supply cannot be relied upon to meet the gap between our current supply and demand. Transportation costs have increased, as have the cost of the raw materials that the mills rely on.
When Will the Cost of Steel Stabilize?
The steel mills are doing their best to stabilize the cost of steel while maintaining the quality of the product, but it will not happen overnight. Current projections show the prices beginning to stabilize within the next few months as additional capacity will come onto the market and begin to provide relief. However, although capacity is increasing, demand is not slowing down. With current demands continuing to climb, relief may be slower until the gap between supply and demand is a little closer. Once the steel mills are back to operating at pre-pandemic levels, things will begin to stabilize in this industry.
How to Respond to the Increasing Cost of Steel
Concerns related to the increasing cost of steel are hard to ignore. With the cost of material high, it inevitably will increase the cost of fabrication projects. Many complex builds take weeks or even months to complete, which makes material costs for these projects vulnerable to price fluctuations. One of the best ways to respond to the fluctuating costs is to partner with a fabricator who will work with you to avoid surprises from rising material costs. An experienced, quality fabrication partner will be able to gauge the market a little better than others and may guarantee material pricing for a period of time, usually several days, from the estimate. Many fabrication partners will collect payment for materials at the beginning of the project so they can purchase at the best possible price and avoid any additional project costs down the line.
Understanding the factors in play can help industries respond to the increased cost of steel in a productive way. Providing accurate estimates, locking materials in at the best prices, and providing transparency to all customers can help your industry during this recovery period. As the economy moves towards a more stable supply and demand blueprint again, trust in your fabrication partner to weather the storm on your behalf. We know the challenges you face, and we can see the light at the end of the tunnel. Let us help. Swanton Welding Company can guide you through your next fabrication project with a stellar team of experts and a comprehensive list of capabilities. Contact us today to learn more.