Trends and Forecasting: Domestic Steel
With the volatility of the world we live in, general angst isn’t the only thing increasing—the cost of steel has been climbing in the US since August, predicted to top $1,000 per ton in February. This is happening for several reasons. The most impactful reason for the cost of steel is the increased volume of new construction resulting from record low interest rates which created a supply vs. demand spike in cost. The second, and somewhat predictable reason, is the constraints in US Steel production caused by COVID restrictions. Even further exacerbating the cost increase from higher demand and reduced domestic production is lack of steel imported from countries like China. Much like the increased new construction here in the US, China is consuming the steel it produces as opposed to sending it into the world market.
The big question now is: How will we be impacted as consumers? To add to an already tumultuous and notably un-fun year, rapidly increasing prices are expected to remain high for the foreseeable future, suppliers are hesitant to lock in prices and are therefore more likely to pass on increases to the consumers, and longer material lead times are extending project timelines which costs the consumer both directly and indirectly.
It’s not as if we’ve never seen the cost of raw material fluctuate like this. We all know what goes up must come down. But in the meantime, there are things you as an owner can do to help mitigate the impact to your project(s), and it really all comes down to the contractor you select. Make sure that contractor has strong financials to weather the storm, long-term relationships with suppliers capable of passing on best available terms, and that they understand the forces in the market causing this turmoil. Finally, make sure your contractor has the expertise to efficiently design your building so your steel tonnage is accurate, ensuring you don’t pay any more than necessary for the steel. The contractor that can check the “yes box” to all of those terms is best able to help you navigate in today’s environment. If you can bring that contractor to the table early, it will allow them to fight for the best value through preconstruction.