In 2020, COVID-19 initially caused declines in the price of steel and other metals. This was largely due to reduced metal demand. However, in the years since, the price of metals has risen with the recovery of this industry. Once lockdowns began to lift, the demand for steel skyrocketed, forcing the steel industry to play catch-up to meet that demand with a proportionate supply. With more recent increased production and international imports, steel prices will eventually decrease.
Why Steel Prices Have Increased
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At first, COVID-19 had a detrimental effect on steel prices. Throughout Q2 of 2020, the combination of international lockdowns and a reduction in demand contributed to decreased steel supplies and prices. Construction companies and automakers alike were cutting back or halting production, and likewise, steel manufacturers had recession concerns and so reduced output to guard against overinflated inventory. This was a global occurrence. Multiple countries like the UK, Japan, and Vietnam have released data detailing reduced steel production as downstream demand declined.
There was quite a reversal, however, as 2020 went on and steel consumption patterns changed again. With large levels of government stimulus money pumping into the economy and vaccines improving the economic outlook, the market began to recover and the demand for steel rose rapidly as construction increased. However, this change made restocking difficult for manufacturers. The short supplies from earlier that year were now limiting the steelmaking industry’s ability to meet raised demand or rapidly restock through the supply chain. In December 2020, prices for steel and steel long products increased significantly, more than doubling at various times during the pandemic recovery. Steel long products include:
- Wire
- Reinforcing bars
- Rods
The pandemic also hindered the production of long products in countries outside of China specifically, creating an additional roadblock to regaining supply strength that would decrease prices. China received a large economic stimulus package, much of which went toward internal infrastructure and construction. Because of China’s own demand for steel and other products, exports reached a multi-year low toward the end of 2020. As a result, the market wound up struggling with undersupply in nations outside of China. While recovery eventually came, demand increased too rapidly for the steel industry to keep up.
Prices Will Eventually Decrease
While the lack of supply amid a surge in demand dramatically raised steel prices, this trend isn’t likely to continue for much longer. The prices seen in 2021 were some of the highest the industry has seen since the global financial crisis in 2008, making this a phenomenon that’s highly unusual. As such, prices will presumably go down as the supply once again meets the demand.
Also, imports to the U.S. have increased since late last year, which will help with the normalization of the industry and its pricing. With the perceived certainty of ongoing demand, steel companies can more effectively manage their inventories and continue to ramp up production as the global economy improves. Eventually, the industry will stabilize, and the cost of steel and other metals will adjust accordingly to make prices more affordable across the globe.
High-Quality Steel Parts From Ohio Valley Manufacturing Inc.
Despite the persistence of COVID-19, Ohio Valley Manufacturing remains open and is here to help. Since 1999, we have supplied our customers with stamping, transfer, blanking, and value-added components of numerous types. As an ISO 9001:2015-certified company, we supply manufacturers of vehicles, agricultural equipment, appliances, and other products with a combination of state-of-the-art equipment, top-quality materials, and unparalleled industry expertise.
If you would like to learn more about our selection of services and equipment, contact us today and we’ll connect you with a member of our sales team.