What Factors Impact the Price of Steel?

The relatively low cost and strong physical properties of steel naturally makes it a popular choice amongst consumers. Steel continues to gain popularity due to its versatility – it can be used to create any kid of building.

Considering that steel is one of the most important metals used globally in the engineering and construction industries, then being aware of the factors that impact its price is significant for you and your business. There are many contributing factors as to what drives the price of steel, some factors contributing to its reduction in price, and others, more unfortunately, contributing to its increase.

Chinese Economy and Global Economic Strength

As the world has become increasingly globalised, despite the production of steel being global, the past few decades have seen the production of steel shifting dramatically from Western countries to China. As a result, Chinese producers now account for almost half of the global supply of steel. Within this time, China’s steel production has increased rapidly as the economy has industrialised.

Due to this rapid growth in the production, use and demand of steel, and the use of steel in diverse industries across the globe, the price of steel is a good indication for global economic strength. Hence, an important determinant of steel prices is the Chinese Economy. China uses almost fifty-percent of annual steel production, and so arguably, may be the biggest determinant of steel prices.

Supply and Demand

Naturally, China is also a major exporter of the steel they produce. As the growth trajectory and demand for steel has decreased, steel producers have resorted to international markets with cheap steel exports and lower prices. In turn, this lowers the price of steel on the global market.

So, strong internal Chinese demand for steel creates higher prices, while weak demand causes an increase of steel within international markets, leading to oversupply and decreased prices.

Cost of Materials

Steel is composed of varying components. A leading benefit of steel is that it is classed as one of the most suitable metals for recycling as it requires little maintenance, and perhaps most significantly, can be reused an infinite amount of times. The raw materials that make up steel impact its price. When the raw materials are in short supply, the cost of the finished product will, naturally, increase. Likewise, when these raw materials are not in short supply and they spike, the knock-on effect can be observed by the reduction of steel prices.

From market conditions, to issues of politics, as new taxes are placed on goods being imported from other countries, the price for the raw materials also increase.

Shipping and Labour Costs

Once more, when shipping overseas, politics can play a major role in the cost of materials used to create steel, as well as the finished goods. Costly shipping will help determine the price of steel. Take the current example of increased fuel prices: high energy prices effect the production and transportation of steel, consequently driving up the price of building materials. The same can be said with the cost of labour: as the costs of the labour increases, the cost of steel inclines with it.

Industry Trends

Researching the trends in the steel industry may give you a clearer example of what drives and impacts the cost of steel. The various industries steel is used for means that the demand for steel continuously remains high – yet, when some industries are experiencing influxes of demand for their product, then the price can be driven up.

Take industries that heavily rely upon steel, such as the packaging industry. In recent years, given the global pandemic that began in twenty-nineteen, the packaging industry was on the frontline. The accelerated growth and demand for certain packaging, such as those delivering essential goods like groceries, was an observable trend. These trends that often cannot be predicted to their full extent impact the price of steel, as these industries are interlinked and often dependent on each other.

Our Team

At DC Space & Storage Solutions, our friendly and driven team are determined to answer any questions that you may have: whether that’s the fluctuating prices of steel, or how we can help implement our end-to-end service in the way that best suits your warehouse needs.

Contact us today for a no-obligation estimate, and we’ll be happy to answer any further questions!