The Key Factors That Determine Steel Prices

By March 13, 2017News, Your Advantage

Associate Contributor (5)

As a company that both supplies and processes flat-rolled steel, Pacesetter must constantly have a finger on the pulse of the steel market. This means paying attention to factors that influence the price of steel, or are otherwise likely to cause disruption or fluctuation in the market.

Like other commodities, metal prices are always shifting in ways that are critical to the life of our business and those in adjacent industries. So, just as a farmer checks his crops, we rigorously monitor circumstances that impact steel prices.

Some key factors to monitor include:

Supply and Demand

As with any commodity, supply and demand is a huge factor that determines steel prices. The higher the demand, the lower the supply, the higher the price. Or, vice versa: the lower the demand, the higher the supply, the lower the price. You get the picture.

Price of steel is determined not just by current supply and demand, but by forecasted supply and demand. The more information available, the better this can be predicted, and the less volatile prices will be. We must also strive to be aware of inventory in the supply chain in every link from the steel mills to the end-user. Inventory can serve to decouple and mute the supply and demand balance in the short-term.

Industry Trends

Price is also influenced by the demand of the various industries steel is used for. If the auto industry is strong, for example, demand for steel may be higher; the same goes for construction, packaging, and other businesses that rely heavily upon steel. I think we’re all spending a great deal of time recently monitoring total economic growth and policy.

Cost of Materials

Scrap metal and iron ore are two of the main materials used to create steel. If there is a limited amount of these resources available, demand exceeds supply, and the cost of materials will jump up. Pacesetter has a focus on zinc-coated products, and the rising cost of zinc has become an important factor to track. Additionally, tracking energy costs can be an indicator of both market conditions and mill cost structures. It takes a lot of heat to melt steel.

Costs of Shipping

By the same token, materials used to create steel as well as finished goods can be costly to ship, a factor that may help determine price. If shipping overseas, politics could play a role, and the same goes for the cost of labor and fuel. We must also consider the risk and leadtime associated with a given shipping mode. In a volatile steel market, selecting a freight method with a longer transit time can have a huge implication.

Time of Year

Time of year has its effect on many industries, and those that use steel are no different. Holidays, weather, and seasonal highs and lows affect the output of new products, either raising or lowering demand. We’ve also seen how seasonality can impact shipping patterns and transit modes. And with changing demand, of course, comes pricing fluctuations.

It takes a lot of effort to monitor all of these factors, plus many others not listed here. Pacesetter subscribes to and monitors dozens of different news sources and publications, and is constantly engaged in conversation with our customers and suppliers on these topics. The fact that you’re investing time reading our publication indicates this is important to your organization, too. We hope that you’ll keep us in mind as a resource for your steel needs in the future, and trust that we’re keeping your needs in mind with every passing day.