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Steel prices have been caught in a long-term downtrend since the summer of 2018 and, more recently, have faced a decline in demand related to the COVID-19 pandemic.
Steel mills have suspended production at furnaces around the country amid the drop in demand, particularly from users like the automotive sector. After suspending production in March, Detroit’s Big 3 is only just this week restarting production at its North American facilities.
What does this all mean for steel prices?
In short, steel prices could spike — and industrial buying organizations will want to have plans in place before this happens to avoid losing some serious cash.
This week, MetalMiner released a two-page guide for anybody buying steel. The quick-hit guide features two likely market scenarios and five tips on how to prepare for a steel price spike before it happens.
“The most successful strategies will take the peaks off the price spikes,” said Don Hauser, vice president of business solutions for MetalMiner and former steel buyer for John Deere. “It’s not as important to get the best price as it is to make sure you never get the worst price.”
Amid the COVID-19 pandemic, steel mills across the U.S. have idled production amid declining demand.
With those supply sources taken offline and a projected demand recovery — particularly from the restarting automotive sector — the elements are there for some upward movement in steel prices.
“Mills have taken out an unprecedented amount of capacity in an effort to stabilize pricing,” Hauser continued. “Then they announced increases lately and have been diligent in not undercutting price for the sake of volume. Some of those increases have stuck. Finally, as demand picks up, prices will gain some legitimate upward pressure that will be accelerated by panic buying. This won’t be corrected until more capacity is turned back on but not until after the price spike.”