Will You Be Affected By Rising Steel Prices in 2016?
As a consumer and first time builder, your role in any purchase is simple: begin to research the product you’d like to buy and the companies that offer it, then ultimately decide on the best fit for you when it comes to constraints such as scope, cost and schedule. Sometimes, those boundaries are straightforward. When it comes to the rising steel prices and it’s affect on manufactured steel goods, the process can get convoluted.
The prices of individual metals, like steel, are influenced by a variety of factors, including but not limited to global production, current market conditions, supply, demand and the manufacturing process. Over the last couple of years, the price of steel has been at a low point because the demand is low. The falling price of steel has been extremely favorable to steel building consumers since 2012.
As you might be aware, steel prices can be extremely volatile, just like gas and oil. Like many manufactured goods, the price of steel buildings aren’t driven by the raw material price alone. The manufacturing process also plays a big part. Steel is one of the most common materials in the world and due to its durability, resistance to heat, and poor conductivity, it’s ideal for a huge range of options. The construction market accounts for 20% of steel usage worldwide and is used in every construction sector such as residential, commercial and industrial. As construction trends up with the recovery of the economy, the demand for manufactured goods, like the gas you pump into your car and the steel building you have your eye on, trend up as well.
Over the last few years, demand for many manufacturer’s products have been stagnant and many manufacturers have tailored their process to the lower demand. As demand rises again, these manufacturers will have to retool and hire more workers to keep up. Many experts believe this will cause the price of their goods to increase by 20% to 30% almost overnight. The market should re-balance, but it could be years before that actually happens.
Not to be left out, economic slowdown in China has dealt a massive blow to the global steel industry. The demand for steel is predicted to rise due to Asian mills going bankrupt. China’s steel industry is still reeling from overcapacity and not many signs point to positive recuperation any time in the near future. In fact, as supply and demand teaches us, the supply of steel will decline as the demand for the commodity grows in China and some South American countries like Brazil.
Why should you care about overseas demand when the steel building manufacturer you picked makes their buildings in America? It’s simple. As demand rises overseas, it becomes easier for American manufacturers to enter those markets and be successful. This is great news for the U.S. economy, but it’ll mean an increase in the price of the workshop, barn or business front you’ve been saving for and wanting.
Again, all you need is a basic understanding in supply and demand, and you can see the previous low demand for steel meant a low price for steel in 2015, and the years leading up to the present. That’s great for steel building customers right now! According to knoema.com, the price of steel currently sits at a recent all time low of $472.10 per tonne. This is even down from the 2014 price of $570.40 per tonne. The pricing quickly changes when we look at the other side of 2015. The graph above shows an expected increase of 30% by the end of 2016 on the raw commodity. When you combine that with increased demand for American manufactured steel products, it’s clear that the cost of a steel building in 2016 will be much higher than it has been in the past few years.
You don’t have to give up on your project if you don’t have a firm understanding of the market. But you can make better decisions on when to start.
Armstrong Steel provides qualified customers with a simple way to take advantage of lower steel prices right now. While we won’t be able to stop the constant rising steel prices in the next few years, we can provide some shelter from it. It’s called the 90-day Price Lock Guarantee. Once you lock in your price with a small engineering payment, you avoid all price increases for a period of 90 days. You’ll gain the security of 2015 prices before the inevitable increase of prices in American made steel buildings.
You could always take the chance to put off your steel building purchase, and risk the price increases of a volatile steel market. It seems for the foreseeable future, at least the next four years, steel prices will never be cheaper than they are right at this moment.
What are you waiting for? Contact an Armstrong Steel building consultant, and begin the path to steel building ownership today. At this point, you have nothing to lose.