US Manufacturers Scramble Amid Rising Steel Prices
Rising Steel Prices Threaten Manufacturing
Campbell Soup (CPB), Peloton (PTON), Ford (F), General Motors (GM), and Steelcase (SCS) are among the companies going to great lengths to secure steel, as rising prices are hurting their ability to produce soup cans, exercise bikes, desks, vehicles, and a host of other products.
Steel and aluminum prices are rising at a rapid pace, forcing companies to accept whatever supply they can get and prompting many to hire more workers to source supply. Steel prices were around $1,940 per ton at the start of September. That is a huge jump considering that in both September 2019 and 2020, steel cost $560 per ton. The price for steel and iron nearly doubled in August on a year-over-year basis—the biggest increase since the 1920s when prices were first tracked.
Tariffs and Strong Demand Drive Metal Prices Higher
Rising prices for steel and other metals adds yet another challenge for the US manufacturing industry, which has been struggling with semiconductor shortages, shipping delays, and a lack of workers during the pandemic. Steel prices are being pushed up due to strong demand for goods as well as tariffs on imported steel. These tariffs were put in place by the Trump administration and have continued under President Biden.
To adjust to the current situation and keep production going, companies are purchasing metal sizes that are not standard. They are also hiring more workers for their supply chain units, passing along the costs to consumers, and buying more imported steel.
Calls for US Producers to Step Up
Steel production in China accounts for over half of the world’s steel. But steel manufacturing in the country is projected to decline in the coming months. As a result, some contend that US steel producers including United States Steel (X) and Cleveland-Cliffs (CLF) should do more to bring idled plants back into action. Since the pandemic began the US steel industry has collectively removed around seven million tons of steel production capacity.
US manufacturers have faced a tough time since the pandemic began. In addition to parts shortages and a lack of workers, they now have to contend with steel and metal prices that do not appear to be coming down anytime soon. It will be interesting to see what impact that has on the prices consumers pay for a wide variety of products.
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