Chaos In Steel Market As Manufacturers Battered By Shortages, Soaring Prices

"However, the recovery in automotive production and white goods manufacturing was quicker than expected when the strictest lockdown measures were lifted. The construction sector was less affected, as it was supported by government stimulus schemes in many regions. The restarting of steel plants was not sufficiently quick to meet growing demand, while inventory levels reduced to historical lows, with restocking across the steel value chain in Europe and the US creating additional demand. Steel prices rallied in all regions in late 2020 as a result," Fitch Ratings explained in a recent report.

Steel-consuming manufacturers are voicing their frustration with the extremely tight market. 

"It is very frustrating," said Hale Foote, president of California-based aerospace parts maker Scandic Springs. "I am looking at great business…but I don't have any material supply."

Since last August, domestic steel prices have surged 160%, leaving steel consumers in a massive predicament - whether to absorb or pass along additional costs. 

"We'll be lucky if we break even at this price," said Stuart Speyer, president at Tennessee-based Tennsco. He said steel costs of lockers, bookcases, and cabinets up nearly 100% in six months. 

Whirlpool warned last month that rising steel costs would reduce profit this year by at least 150 basis points. Farm equipment maker AGCO and crane maker Terex have increased prices to offset rising steel prices. 

Besides steel, the pandemic has also caused supply woes in the lumber and semiconductor industries. Political and geopolitical developments have also upended global supply chains. 

Given the short-term nature of the steel chaos rippling through America's heartland - the mismatch in supply and demand could continue through the first half of the year. 

Are surging commodity prices the first leg in the next commodity supercycle

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