Steel prices fluctuated greatly throughout the past few years because of multiple factors. Understanding the reasoning behind steel price changes allows you to plan ahead based on pricing projections. Major world events, from pandemics to wars, cause instability in the industry, supply chain and pricing.
Explore more steel industry insights below.
How Is Steel Priced?
The cost of steel is always fluctuating, and there are multiple reasons why. 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 inconsistencies and mining operations both contribute to the changing price of iron ore. Any other materials used in steel production, such as zinc or scrap metals, can also interfere with prices depending on their availability and impact on demand.
- 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. And if demand plummets, supply increases and prices drop. The costs are impacted by current and forecasted supply and demand. Future predictions can impact the overall price of steel at a certain time.
- 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 labor. The shipping route will also affect prices, especially if the steel is traveling overseas. Political unrest or conflict between countries can influence steel shipping costs.
- Oil prices: Oil and steel prices change similarly. When oil is cheap, so is shipping finished and raw materials.
- Time of year: The season will also impact steel prices. Holidays and weather can cause highs and lows throughout the year by impacting travel and operations.
- Industry trends: Various industries, from automotive to construction, can alter the demand for steel depending on their growth and products.
With so many factors at play, anticipating the changing prices can be tough. Unforeseen events also contribute to steel market volatility.
Steel Prices in the Past
To understand how prices can fluctuate based on global events, look to the past steel industry trends. 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 due to the pandemic.
In the following year, steel prices were still on the rise. For instance, hot-rolled steel prices were less than $500 per ton in September 2020. By September 2021, the peak price was $1,955 per ton. That is a nearly 300% increase over just 12 months.
Throughout 2022, steel prices trended downward. As of November of that year, hot-rolled steel was priced at less than $700 per ton due to global factors such as spiraling inflation and ongoing supply-chain hiccups slowing many manufacturing operations across different industries.
The steel industry has seen some instability throughout past years. While supply and demand fluctuate, the market’s capacity to grow can change, as well.
Steel Industry Projections
While the steel industry continues to recover from the lingering effects of the COVID-19 pandemic, it is not out of the woods yet. Other global influences can continue to cause supply and demand instability.
The industry’s future is largely dependent on the outcomes and influences of high global inflation rates and world conflicts. These factors, among others, will determine what happens.
Ultimately, the predictions about what is ahead for the steel industry are highly uncertain. In the past, steel demand was continuously on the rise, paired with economic growth that was much more stable prior to the pandemic.
With so much at stake and in flux regarding the global economy, making accurate forecasts about the steel industry’s future is nearly impossible. Predicting steel demand may be more complicated and challenging than ever before. That said, some industry experts do anticipate industry growth in the coming years.
The Importance of Monitoring Steel Industry Trends
Manufacturers need to keep an eye on changing steel industry trends. Monitoring price fluctuations allows businesses to make more strategic sourcing decisions. Companies must strive to control overhead costs to the best of their ability to remain competitive in the face of unstable steel prices.
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