Factors contributing to the rising cost of steel

The cost of steel increases and decreases due to a number of factors. First of all, there is the issue of supply and demand. When demand outstrips supply, costs rise. Conversely, when the demand for steel falls, so does its cost. However, possible sources of disruption to the supply of steel have to be carefully monitored and checked.

Analysts are paid to anticipate fluctuations in the price of steel coil and so on. COSASTEEL as a Chinese steel coil manufacturer and explains how steel is made.

Scrap metal is used in the production of steel coil and other types of steel. That means that there must be a significant volume of scrap metal if steel production is to continue unabated. There can be shortages of scrap metal if countries don’t use enough steel to generate scrap. When this occurs the cost of scrap metal rises and so does the cost of steel.

Apart from scrap metal, iron ore is needed if the steel is to be produced. Unfortunately, in recent years there has been little investment in mining iron ore. The countries that do invest in it are primarily in China and South America. China, of course, has emerged as a country which has a growing demand for steel. There is currently a shortage of iron ore.

Coke is also needed to produce steel, and this is also in short supply. Coke is pure carbon produced when coal is heated to high temperatures in furnaces, so that all its impurities, for instance, ash and sulphur, are removed. Not many furnaces have been built around the world lately because of concerns for the environment. In the developed world there are very few furnaces still in existence. Much of the coke for sale on the open market was produced by China, but now China needs its own coke to make steel.

Because of the demand for steel-making materials, costs have risen and are continuing to drive steel prices higher. It is unlikely that this trend will be reversed any time soon.
Increased costs

Another reason for the rising cost of steel is the necessity to transport it. Trade in all commodities has greatly increased in the past twenty years, and this has led to shortages in shipping. Shipyards are not building ships quickly enough to alleviate this situation. The shipyards need to produce bulk carriers, cargo ships and double-hull tankers. The cost of purchasing new carriers will add to the cost of steel and ultimately of steel products.

It should also be pointed out that if an industry which uses steel products, for example, the car industry, is strong, then the demand for steel will be even higher. This is also true for the construction industry and every other business that utilises steel. Clearly, research and development departments should be trying to find viable materials to replace steel.

A further problem for the steel industry is the global political situation. This can also have an adverse effect on steel prices. Tariffs will increase prices too.

The future for steel doesn’t seem to be rosy. There is a shortage of raw materials needed for steel production, and unless the global situation changes, steel could become even more expensive.

If you want to know other steel knowledge (PPGI, Galvanized steel coil), please visit www.ppgisteel.com

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Emmy Skylar

About the Author: Emmy Skylar

Emmy Skylar started working for Debate Report in 2017. Emmy grew up in a small town in northern Manitoba. But moved to Ontario for university. Before joining Debate Report, Emmy briefly worked as a freelance journalist for CBC News.  She covers politics and the economy.

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