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Why have steel prices have gone up recently? | Will they come back down? | Colorado Fabrication Shop

Posted by Darren C on Jan 7th 2021

CFM industries | Fabrication Shop

Hey All!

I felt I needed to post some things I have found recently.  As I went to order more raw steel material last week, I was shocked to find out that the cost has gone up even more than it already has - waay more!  Over the last month, my cost for raw material has more than doubled.  

This has forced me to raise my prices in order to remain in business and make a profit.  In no way did I raise my pricing by the amount steel has gone up, but more split the difference, in order to hopefully keep my customers happy.

So, WHY has this happened?  Well, from what I can figure out in my bit of research online, it seems that it has been just a series of unfortunate events.  There are 2 key reasons that I can come up with - one being that over the last few years there have been very large tariffs assessed on foreign steel, and the other being COVID-19 (of course!).  

Steel Prices in USA | We build quality components here in Colorado 

The tariffs were partially put in place to try and equalize the cost of US products and foreign products (steel in this case), therefore keeping more companies in the US purchasing US made steel - which was a good thing.  This also kept the on-hand supply of foreign steel limited.  Then came COVID, and initially since most businesses shut down, the demand for steel dropped drastically.  This caused the steel foundries to shut down some of their large, costly furnaces and cut their production.

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Next came a huge surge in online ordering as people were stuck at home with more free time than normal, and once opened back up, manufacturing companies started ramping production up to a level they hadn't been at even prior to the shutdowns.  

Now, fast forward a month or two, and a good amount of the steel material that was available has been bought up, and steel foundries are scrambling trying to get more manufactured.  But right at this time, the supply (from the foundries) is still low, and the demand (from myself and all the other manufacturing companies out there) is really high.  SO, supply and demand means prices are going to go up, and will remain there until some things change.

Custom Fabrication Shop | So WHEN will things come back under control?  

Well, that's simple - when supply can catch back up to demand, theoretically the prices should drop again.  But we can also assume that the steel foundries will be reluctant to drop prices right away so it may take some additional time.  One thing that we may have going for us is that a lowering of the tariffs might cause some more competition since foreign steel will become cheaper than US product. Competition would force the price of US steel to come back down in a more timely fashion. 

Hopefully that helps everyone understand some of the reasons that we have had to raise our prices.  We will do what we can to trim our manufacturing processes and keep our profit margins tight while we ride out this wave.  We are optimistically looking forward to the future and we wish everyone a great year in 2021!!

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