How a steel shortage in the United States created a market bubble
The Covid-19 pandemic plunged supply chains into chaos, and steel – an essential metal used in everything from dishwashers to cars – was not immune to these disruptions.
“Steel is certainly one of those examples of shortages, higher prices and growing customer frustration,” Anirban Basu, chief economist at Associated Builders and Contractors, told CNBC.
Demand for steel fell at the start of the coronavirus pandemic, but then quickly skyrocketed. At one point, steel prices were 300% above their pre-pandemic levels at over $ 1,900 per tonne. Before the pandemic, the price of steel was between $ 500 per tonne and $ 800 per tonne.
The high price of steel hasn’t really gone down that much, and some fear it’s a bubble about to burst.
“They’ve turned into a bubble. So they’re going higher because they’re going higher,” CRU Group analyst Josh Spoores told CNBC of steel prices.
Steel is a key material in infrastructure projects, making the Biden administration’s plan to pump billions into U.S. infrastructure a huge boon for manufacturers.
“We estimate that for every $ 100 billion in new infrastructure investment, that will mean 5 million tonnes of additional steel demand,” said Kevin Dempsey, CEO of the American Iron and Steel Institute.
Globally, demand for steel in 2021 is expected to increase 3.8% from 2020, according to the World Steel Association.
Watch the video above to learn more about America’s largest steelmakers, the impact of tariffs on steel, whether it’s the US steel industry can meet demand, and what happens when that “bubble” bursts.