Metal Shortages and Record High Prices
The prices on important resources such as steel are continuing to soar due to high demand and low supply. The pandemic had a negative impact on many industries which
led to supply shortages on critical goods. As restrictions are lifted and businesses are returning to full capacity, the metal shortages are not only continuing, but are becoming more severe.
Why Are There Shortages Now?
If everything is going back to normal, and businesses are bringing back their workers, why are the metal shortages getting worse? When the pandemic began, nearly every business took a hit. Manufacturing businesses who had to limit their workforce were not in need of the same amount of supplies, such as metal, as they were when they were at full capacity.
Once the restrictions were lifted, manufacturers and their suppliers returned to their normal levels of production at the same time. This created a huge spike in demand for metal, but the suppliers did not have the time, or the workforce to prepare. The inventory levels that they built up before the pandemic are gone, and now they are struggling to keep up with the orders they are receiving. This situation is causing prices of metal to skyrocket.
In May 2021, steel prices in the US hit a record high national average of $1,600 a ton. The price of raw steel went up 75%, while US hot rolled coil prices saw a 210% increase since August 2020. In the short term, many analysts believe these inflated prices will be here to stay. Until the balance between supply and demand returns, these prices will be the new norm.
Besides supply and demand, there are other underlying factors that have caused the prices of steel to go up including fuel prices and labor. Although the steel mills are inviting all of their employees to return to work, many have not yet returned. Right now, roughly 10 million Americans are unemployed. Businesses are hiring in record numbers and are even starting to raise wages to entice people to return to work. Wage increases combined with low workforce rates will cause price increases across many industries, including metal suppliers.
In addition to rising costs created by material shortage and wage increases, the cost to transport materials around the world is also increasing at higher-than-anticipated rates. The increased costs to move materials around the world result in higher prices.
A Reliable Source
As a custom metal fabrication company, Switzer is feeling the effects of metal shortages first hand. We are doing everything in our power to source metal for our partners and to keep our prices affordable. Our long-term relationship with our key material suppliers has put us in good position to stay competitive. If you are in need of custom metal components during these times of uncertainty, you can count on Switzer as a reliable source.
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