The demand for steel is soaring. Over the last six months global steel prices have continued to rise significantly. In addition, transport and logistics costs have also been under pressure leading to higher container, shipping, and other freight charges. Let’s look at why steel prices are increasing and what is being done to minimize the impact.
What is causing the price of steel to increase?
Steel manufacturing capacity dwindled throughout the most challenging points of the COVID-19 pandemic. When the worst of the pandemic had passed in New Zealand, steel manufacturers struggled to meet the recovering demand and restocking requirements. This ultimately led to a rapid increase in prices.
Up to 30% of global steel manufacturing capacity (excluding China) was paused or largely reduced because of a massive drop in demand, courtesy of the pandemic. Of course, this meant that not long after the pandemic’s peak the phased reopening of steel manufacturing plants, combined with their production rate, was not fast enough to satisfy the backlog and renewed demand.
With steel prices at near record-breaking highs and some prices almost doubling from October 2020 to April 2021, it’s expected that this upward price trend will continue over 2022. Unfortunately, many steel distributors are being forced to increase their customer-facing prices due to the wholesale price increases.
What we are doing to help
Our focus has been on working closely with all suppliers to minimise the impact this cost increase has on our customers. We are updating supply agreements with key merchants to secure inventory and pricing on primary products. This will allow us to hold pricing for longer and reduce the likelihood of stock-outs.