Steel costs in the United States are currently at an all-time high.

As you all know almost all the steel stocks in Malaysia have been dropping recently. As most of my investment is on AYS, I did some research and I am surprised to see Malaysian investors keep selling their steel stocks when steel price is shooting up higher and higher in almost all the countries around the world.  

With the recovery from the Covid 19 pandemic, economy rebounding and the demand for new construction picking up rapidly, steel mills across the country are struggling to keep up.

If you know one thing about economics, it should be that when demand is high and supply is low, prices are going to skyrocket—and that's exactly what is happening.

Steel costs in the United States are currently at an all-time high.

In July of 2020, the price of steel was selling for around $440/ton. That number more than doubled to $900/ton in December of the same year. Four months later, in March of 2021, steel was going for an unprecedented $1,270/ton!

For over 60 years, Lake Air has been buying large quantities of steel and other industrial metals—both sheets and coils. Like many other businesses, we are directly impacted by the price of steel, and thus we always have to keep a close eye on the market.

We’ve experienced plenty of material shortages and price fluctuations in the past, but nothing like this. For that reason, we wanted to take this opportunity to educate you on how we got into this situation, what’s happening in the steel industry today, and what to expect in the coming months and years.

HOW WE GOT HERE

Like with many globally significant events, you probably remember the situation we were in during the early spring of 2020. The COVID-19 pandemic was wreaking havoc on the economy, and the majority of domestic steel mills—like many other manufacturers—were forced to either shut down entirely or vastly reduce production.

At the time, it wasn’t all that disruptive because we a) had a huge surplus of steel reserves, and b) the demand for steel and metal products had also declined due to the shutdowns. Fast forward to today and unfortunately, neither of those things are still the case.

THE STEEL INDUSTRY TODAY

With the economy rebounding and the demand for new construction picking up rapidly, steel mills across the country are struggling to keep up. If you know one thing about economics, it should be that when demand is high and supply is low, prices are going to skyrocket—and that’s exactly what is happening.

Steelmakers are attempting to address this issue, of course, but with most things, it will take some time. Refilling lost roles in a job seekers’ market has been tough, so very few mills are back up to 100% production. There are also several new, more efficient mills expected to come online, but it will take a few months’ time to get them all fired up.

In the past, when there has been a domestic material shortage, companies have looked outside of the United States to source their metal. Unfortunately, the Section 232 tariffs imposed on imported steel products in 2018 have made this an all-too expensive and unreasonable option for most.

While these tariffs have been a huge boon to U.S. steel manufacturers, there is no denying that it’s hurting the wallets of not only the companies that rely on raw steel (such as Lake Air) but the end consumers as well.

WHERE WE’RE HEADED

While the good news is that there’s an end in sight, experts are split on exactly when that tipping point will be. While many industry analysts think prices will start cooling off by year’s end, others predict it may take as long as two years.

In the meantime, you can expect to see extended lead times and steel prices that continue to rise roughly 10% each month for the foreseeable future. This is why it’s important that—unless you can afford to hold off on your projects until things settle down—you should put your metal fabrication orders in now.

In Malaysia: Since our recovery from the Covid 19 pandemic, there is no more MCO lockdown, all our industries especially property and infrastructure construction will increase.   

I trust all investors will read this article carefully to take advantage of the rising demand for steel which is required in all property and infrastructure construction. Investors should buy instead of selling their steel stocks.