Steel Prices

Steel Price Contract Negotiations Reflect Rocketing Prices

Capital expenditure has increased in the plastics industry in recent years because businesses have realized the benefits of using it over operational expenditures. U.S. businesses in plastics spent $4.1 billion on CapEx in 2015 and $7.4 billion on CapEx in 2019....

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Mark Stocker

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You’ve likely noticed that everything costs more nowadays, including steel. Suppliers and consumers alike are concerned about rising costs, and there’s been plenty of blame to go around for the increase in prices.

However, one person or one nation alone isn’t the reason for these elevated prices. Take a look at what’s happened in the United States, China, and the EU to make steel more precious than gold – or so it seems. Multiple factors have created the perfect storm, and now everyone is trying to hang on.

Getting a new steel price contract in the US

Thanks to its $1.1 billion purchase of AK Steel and Arcelor Mittal’s steel mills, Cleveland-Cliffs just became one of the two most prominent players in the US steel industry. If you’re looking to contract for US-made steel, you have a choice of two sources: United States Steel Corporation and Cleveland-Cliffs.

During the 2020 pandemic, many US homeowners focused on home improvement projects or purchased new cars. Steel consumption gutted inventories everywhere.

Now limited supplier choice will likely mean paying a premium for steel from one of the two companies manufacturing it in the United States.

China’s energy crisis of 2021

To meet pollution reduction goals, China committed to lessening its reliance on coal for energy. Currently, only one-third of China’s energy comes from sources other than coal. Under President Xi Jinping’s leadership, China plans to reduce its coal energy use by 13.5% no later than 2025.

While the intentions are commendable, the outcome has been less than desirable. China restricted coal mining and closed many of its inefficient coal plants. With less available coal, China turned to hydroelectric energy. However, this year’s drought constricted energy production there, too.

As a result, China began rationing energy, which in turn, has affected steel manufacturing plants. Steel production in China is now down 11%.

Prices double in the EU, but predictions falter

Meanwhile, steel price contract negotiations in the EU are moving forward; but don’t expect to see an immediate decrease in prices. Early predictions indicate that steel prices will double in 2022, hopefully decreasing in 2023.

The market experienced a materials shortage here, first in chips and semiconductors and then in hot-dipped galvanized steel.

Looking ahead to 2022, Taiwan has stepped up its production of chips and semiconductors; and auto manufacturers are contracting for steel as quickly as possible. However, no one can accurately predict what steel prices will be until negotiations are complete.

With limited supply and soaring steel production costs, you can expect the steel squeeze to continue, at least through next year. 

After that, it’s anyone’s guess what will happen next.

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