The steel industry is booming like never before as the global economy recovers from the pandemic, and the ripple effects are being felt by everyone from homebuilders to appliance-makers.
Demand is so frenzied that U.S. mills have stopped taking orders from customers in recent weeks, according to Dan DeMare, director of sales at Toledo, Ohio-based Heidtman Steel Products Inc. DeMare said the mills may not begin taking new orders until late summer so that they can clear backlogs.
In a global economy already shaken by supply shortages and inflation worries, the mills' moves may signal more delivery snags and even higher prices for a commodity key to a wide swath of industries. Across the world, about 500 pounds of it is used per person each year, in everything from paper clips and automobiles to skyscrapers and toasters.
Steel futures in the U.S. have tripled in 12 months as the swifter-than-expected economic recovery caught producers by surprise, while in China futures reached a record after authorities pledged to lower output in a push to control emissions. Prices have also surged in Europe, so imports may only rise a certain amount even if the U.S. were to lift Trump administration tariffs.
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"The sharpness and speed of the moves has been something like I've never seen before," Phil Gibbs, an analyst at Keybanc Capital Markets in Cleveland. "I've been covering this space now close to 15 years, so I've seen some pretty crazy runs."
While prices have surged across commodities, the 220% jump in U.S. steel in the past year eclipses other highfliers such as copper and crude oil. A Standard & Poor's index of steel companies, which includes Nucor Corp., Cleveland-Cliffs Inc. and U.S. Steel Corp., is up 69% in 2021, easily the benchmark's best performance through the first five months of the year.
The rally seemed unimaginable just 10 months ago when steel executives said it could be at least 2022 before metal demand would return to pre-pandemic levels. The quick recovery and slow ramp-up of steel plants drained inventories that were already low during the height of the pandemic.
Lumber, a market where producers were also caught short amid a surprise surge in housing demand, is one of the few materials with comparable gains. And even homebuilders are having to reckon with the effects of tight steel supplies.
Carl Harris, who has spent 36 years building homes, said he's looking at two-month delays on refrigerators, ranges and dishwashers. Delivery times that are normally two to three weeks are now as much as half a year in many parts of the country, he said.
The lag means Harris can't install the appliances package to market the two-bedroom empty-nester home just outside Wichita, Kan., even though the rest of the house is ready.
It's also getting more expensive to drill in the shale patch as rising prices for steel, cement and other supplies and services lead to higher costs for explorers, according to Citigroup Inc.
Executives at Ford Motor Co. said on a first-quarter conference call that the company has seen commodity prices increase primarily for aluminum, steel and precious metals.