At first, it sounds counterintuitive: inflation leading to lower prices. But that’s precisely what’s happening in the steel industry. Inflation and uncertainty over signs of a potential recession are keeping buyers from purchasing as they normally would, lowering demand and thus lowering the prices of raw materials.
Since raw material surcharges reflect fluctuating raw material costs into the price of steel, when the surcharges drop, the price of steel drops. As worries about slowing industrial activity amid a potential recession, the prices of raw materials are shrinking as companies are hesitant to end up sitting on too much material they can’t use.
However, despite the near-paradox of inflation contributing to lower materials prices, this doesn’t mean costs for manufacturers drop, which is currently impacting the entire steel industry (and most manufacturing industries).
Inflation is driving up the costs of doing business (for one relatable example, think of the price of fuel and how much that increases the cost of transportation) but because steel prices remain low, it’s forcing manufacturers to adapt. Supply chain disruptions continue to make it harder for everyone to get what they need, further increasing costs.
Put simply: costs are rising faster than prices. Margins are slimming. Steel manufacturers have to adapt quickly.
As with anything in a free market, supply and demand plays a big role in the price of steel. In this case, it’s a little more complicated than usual. The supply is there and the demand is there — sort of — it’s just that fewer people are acting on the demand. That is, while people want to buy steel, they don’t want to risk being stuck with it as costs continue to rise and short-term nervousness increases. Thus, the price of steel drops.
Compounding the issues for most manufacturers — but thankfully not Capital Steel — is the ongoing difficulty in staffing. Through the pandemic and beyond, we’ve been able to keep most of our staff, meaning we can operate at full capacity without facing any in-house slowdowns or shutdowns. Other manufacturers have not been so fortunate and struggle to produce at full capacity.
As part of our strategic partnership with our customers, we’re committed to transparency with pricing. Request a quote today and we’ll help you get what you need at the best possible price.