One would certainly hope so when the subject is steel prices. The gains of late have been staggering
with prices of nearly every grade reaching record levels and at astonishing speed. Every consumer of
steel is now struggling with the twin problem of very high prices and scarcity. The reasons for this crisis
are easy to identify, the question is how long these conditions last.
At the heart of the problem is demand that surged far faster than expected and on top of a truly
miserable year that saw steel producers radically reduce output. The 2020 shutdown was not
anticipated and was ill-conceived from the start. Nobody had time to prepare and nobody had any idea
how long the shutdown would be imposed. In the beginning there was confident talk of a May (2020)
rebound but the lockdowns continued for months. The surge in demand at the start of 2021 was far
more aggressive than expected and the impact on prices was no surprise.
There are other elements that further complicate the issue. Industry consolidation in steel production
has meant that companies can focus more on profits than on production. To the shock of no one Arcelor
Mittal sported the highest profits in its history this past year and they are not alone. The steel output
from China has often tempered prices but not this time as China has been consuming the majority of its
own steel and has imposed taxes on steel exports. They have also been shutting down steel operations
in some parts of the country to reduce capacity to some degree.
As steel producers contemplate reacting to demand they are suspicious of the current pace of growth.
They see the auto sector struggling with chip shortages, a decline in commercial construction, rejection
of pipeline projects and endless delays on infrastructure spending. The know that 9.0% growth in Q2 will
not be repeated and have no desire to gear up for growth that may not be sustained. The bottom line is
that steel prices will come off their record highs in the next quarter or two but they will level off at a far
higher price than in 2020 and even 2019.