Steel prices fluctuated greatly throughout 2020 because of multiple factors. Understanding the reasoning behind steel price fluctuations allows you to plan ahead based on pricing projections.
Last year’s unstable economy affected the steel industry significantly, and, with the effects of COVID-19, the steel industry is still recovering. Explore more steel industry insights below.
Factors That Impact Steel Prices
Why is steel is so expensive right now? There are multiple reasons. Steel prices can be attributed to various constantly changing factors, such as:
- Raw material costs: Because iron ore is a major steel component, its cost directly affects steel prices. Seasonal fluctuations and mining operations both contribute to the changing price of iron ore.
- Supply and demand: The simple basics of supply and demand apply to steel prices. When there is a high steel demand, there is a lower supply. Because of this, the price of steel increases.
- Shipping costs: The cost of shipping materials is another key factor that impacts steel prices. Shipping expenses are often determined by the cost of fuel and the shipping route.
- Oil prices: Oil and steel prices change similarly. When oil is cheap, so is shipping finished and raw materials.
Steel Prices Over the Last 6 Months
Because of COVID-19, many industries experienced significant setbacks, and the steel sector is no exception. The temporary shutdown of construction projects and steel production led to companies stopping worldwide steel manufacturing and distribution. As a result, steel supplies tightened, and prices increased.
In the last quarter of 2020, steel prices spiked. The dramatic increase directly resulted from COVID-19 and its impact on the steel industry.
The steel sector experienced a significant amount of fluctuation from the pandemic. In September, hot-roll steel had a benchmark price of $580 per ton, which matched its cost during March. However, in mid-September, mills began announcing an increase in steel prices around $50 to $60 per ton.
In December, hot-roll coil prices increased by 85%. The steel industry is still recovering from these fluctuations.
2021 Steel Industry Projections
The price of steel has been steadily increasing, even into 2021. During the first quarter of the year, steel prices are predicted to remain at an all-time high, but it is anticipated that they will later begin falling.
Now that steel operations are reopening, steel is being produced and distributed more steadily, meaning prices will likley decrease after the first quarter of 2021. This phenomenon results from multiple factors.
At the beginning of 2021, U.S. steel prices rose 20.4%, and shredded scrap steel also experienced an increase of 38.3%. However, this spike in steel prices will decrease because of several circumstances:
- Service centers have been refilled.
- Steel is less in demand because of COVID-19.
- Steel is also less in demand seasonally.
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