Over the course of 2021, the market has seen prices for steel, stainless steel, copper, and other popular base metals rise significantly. Fortunately, ESI has learned how to work with market fluctuations to create sustainable, cost-effective metal products for our customers. Our extensive experience working with a variety of metals also gave us an inside look at the effects that fluctuating metal prices can have on the overall cost of business operations.
Why is the price of metal increasing?
According to a recent article published in the New York Times, prices for steel, stainless steel, aluminum, and copper are at record highs. There are three primary reasons for the price increase in our post-COVID economic recovery period:
1. Tariffs and reshoring.
Efforts by the United States to reduce material imports via tariffs over recent years were already beginning to drive up material prices. Companies manufacturing steel and other metals are being incentivized to consolidate and reshore their operations. Aluminum importers must contend with Canadian supply shortages, and there is stiff competition in the energy storage and electric vehicle (EV) industries for copper and nickel. Notably, it’s an opportunity to create tens or even hundreds of thousands of jobs in the American economy.
This reshoring initiative accelerated when the pandemic hit in 2020, and some tariffs are still in place despite freight shipping costs and truck driver shortages that are forcing new price hikes.
2. Transportation disruptions spurred by the pandemic.
Supply chain disruptions escalated even further through the pandemic, resulting in raw material shortages for companies that are increasing production in a recovering economy. As a result, freight shipping costs are now at an all-time high, with China’s 10 largest ports seeing the largest year-to-year increase in D&D charges — going up an average of 126%, according to reports.
The supply chain issues are not just overseas. Truck driver shortages exacerbated by the Covid crisis and surging eCommerce sales are lengthening lead times and creating what Uber Freight’s head of logistics calls a “shipping Armageddon.”
3. Global capacity challenges.
The trends noted above have resulted in a demand for materials that has exceeded the supply, making it difficult to quote pricing details and lead times for manufacturing projects.
As industries continue to adjust to these supply chain issues and ramp up production during the post-COVID recovery, demand for metal products will likely increase. Add a focus on building clean technology for renewable energy, and a renewed focus on infrastructure in the United States and China, and you have the perfect storm for high metal prices.
Which metals are affected?
While supply shortages and high demand are affecting almost every metal market, the metals most frequently used in industrial production are the most affected. Manufacturers can expect to see increases in steel, aluminum, copper, and nickel especially.
- Steel & Stainless: Consolidation and reshoring of steel operations, along with reduced steel scrap, means higher costs for steel refinement and production.
- Aluminum: Canada, the primary supplier of aluminum for U.S. operations, has established quotas on the amount of aluminum exported to our shores. So far, our aluminum demand far exceeds this limitation—and less availability equals higher prices.
- Copper: Copper is critical for electronics and electrical components. Supply shortages and increased demand for electric cars, infrastructure, microchips, renewable energy, and energy storage are keeping prices high.
When will the price go down?
While record high metal prices are forecasted to drop as the global economy continues to recover, they are unlikely to return to pre-pandemic prices in the near future. The market may still remain tight into 2022 as large-scale infrastructure plans in the U.S. and China keep demand for these metals high.
The pandemic is causing more than a price impact, as shipping challenges may result in lengthier lead times for some materials. Because supply is tight, we recommend adding several months or more to your production lead times in 2022.
Stay Competitive with Cost-Efficient Metal Products by ESI
Due to sourcing uncertainties, lead times for many projects have been delayed. It’s important for your planning to understand how the metal material in your project may impact both turnaround and cost — and our team at ESI can help with that.
To stay prepared, ESI is over-committing to ensure we have the materials we need for future projects. Our relationships with metal vendors over the past 30 years keep us informed about these market trends, and we can offer insights into alternative designs and materials that may result in better costs or faster delivery, while still meeting your project’s application needs.
No matter what the market looks like, the metal experts at ESI work to keep pricing competitive for our customers. We closely monitor metal costs and trends to ensure that your project is completed in the most cost-effective manner. To find out about pricing on our metal products and services, contact us today!