[Industrial Distribution] Q&A: How to Manage Steel's Volatile Pricing

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What’s the deal with steel so far in 2021? Why are prices so high?

In late 2020 and 2021, we have witnessed a meteoric rise in steel prices. During the height of the pandemic, a large percentage of the U.S. steelmaking capacity went offline. Steel demand and inventory stocking needs rebounded faster than capacity could, so we are seeing the classic supply-demand effect, leading to a boost in steel prices. According to Barrons, steel futures have jumped 40 percent in 2021, with no immediate signs of slowing. In fact, a poll conducted by S&P Global Platts found that, “More than half of steel market participants surveyed expect U.S. finished steel prices to remain at their current highs or rise further in the coming six months.” Of course, steel isn’t the only material experiencing historically high prices. In addition to lulls on the supply side, home improvement projects have skyrocketed in popularity, leading to price increases in lumber and copper.

How has this affected businesses that use steel?

For companies that utilize steel, grappling with high prices is a perennial challenge. Meaning, whether it’s steel pricing this quarter, or another unpredictable macro-economic factor down the road, the pace at which these price-impacting events is increasing, and unpredictably so. The largest impact to these businesses is how cost increases for steel and other materials will impact their own pricing, and in turn their margins. It is a difficult question to address, yet finding the solution is critical.

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