If you have been keeping your eye on the price of steel lately you may have noticed something: it has been increasing.
Yes, steel prices have been in a trend lately where seem to keep on going up and up. For better or worse, it looks like this is a trend that isn’t going to change in the near future.
So, while most of us know that steel prices are increasing, it is a much harder issue to look at exactly why this is happening. One of the reasons explaining the price of steel is so complicated is that steel is a global commodity. Not only does this mean that prices can vary on a daily basis, it also means that there are a huge amount of different factors that can influence the price. These factors include such complex issues as the state of the global economy, the impact of natural disasters and the position of the American dollar.
When it comes to steel supply on a global scale, China is the world’s largest producer of steel. This means that Chia’s actions have a deep and reaching impact on the price of steel throughout the world. While China was generating a huge amount of steel, supply exceeded demand, and this led to global prices for steel falling.
However, recently, China has begun enacting plans to move its economic focus away from manufacturing, and instead shifting towards services. This means that China has decreased its production of steel, which has led to a global increase in the cost of steel. This only looks set to increase as time goes by and China continues to reduce its steel production. In fact, according to General Steel, China will look to decrease its steel production by 20% in 2018, with a further reduction of more than 165 million tons in total by 2020.
Compounding this issue, and causing the price of steel to go up further, is the fact that, at the same time as China’s production of steel decreases, the demand for steel in the United States continues to rise.
But it isn’t just China that is having an impact on the price of steel. Recently, the U.S. department announced its recommendation that a global tariff of 24% be placed on steel shipments coming in to the U.S. In response to this recommendation, 15 trade organisations, representing more than 30, 000 manufactures who employ upwards of 1 million people in the United States, sent a letter appealing to President Trump not to enact the restrictions. The letter claimed that these tariffs could force companies to move their production overseas, and U.S. steel using manufacturers employ far more workers than the steel industry as it is.
While it is currently unclear how long the price of steel will continue to rise for, it seems likely that they will rise enough that the increase in price is passed on to the consumer until the trend eventually takes a downward turn.