Within the last two years, the steel industry has seen its highest prices and biggest shortage issues in history. As we mentioned in our last steel price update and forecast for 2022, we originally expected 2022 to bring some stability back to the steel industry as the worst of the COVID supply and pricing issues for steel were behind us.
Back in October 2021, when we released our 2022 forecast, we predicted that steel prices would be flat or gradually decline. We also guessed that supply would stabilize throughout 2022. In fact, steel prices had been falling and supply did stabilize, but recent global events involving Russia’s invasion of Ukraine have caused our 2022 forecast to change.
In light of this, we at Western States Metal Roofing want to give an update on what to expect when it comes to steel prices for the 2nd and 3rd Quarter of 2022, and what kind of impact the steel industry may face as a result of the devastation that continues to unfold in Ukraine.
We recently interviewed Mark Field, purchasing manager for Western States Metal Roofing, to find out what is going on in the steel market today, as well as what industry experts are predicting will happen in the upcoming months.
What Is Happening With The Steel Market Today?
2022 started off looking optimistic for the steel industry. In the beginning of the 1st quarter, steel prices were slowly dropping and pricing was beginning to correct itself from the previous all time highs in 2021.
Metal supplier prices had flat lined by January 2022. They were not yet reducing prices, but they weren’t raising prices either. However, 2022 has shown us that you can make your best educated prediction, but you never know what the future will bring.
On February 24, 2022, Russia’s assault on Ukraine began with a series of missile attacks and has been ongoing for one month as of this writing. Beyond causing a devastating humanitarian crisis, the attacks have led to global supply chain issues that are already being felt and will continue to cause severe disruptions in many industries throughout the world.
In terms of the steel market, we are already beginning to feel the effects as both Ukraine and Russia are two major iron and steelmaking countries.
For reference, steel prices were recorded being as low as $800/ton in early February before the Russian attacks began. Now, prices have gone as high as $1,200/ton.
While we are expecting to continue to feel the effects of the invasion of Ukraine, we do anticipate that the US will experience it to a lesser extent than Europe. Ukraine is one of the top 5 exporters of steel into the European Union, while the United States’ steel supply chain is not quite as interconnected with Ukraine. As of now, the domestic mills have not placed their customers on allocations. That being said, we expect that will likely change in the near future.
What Factors Are Currently Affecting The Steel Market Today?
- Ukraine being forced to idle steel production due to invasion
- Western sanctions and counter sanctions by Russia
- Europe facing steel shortages from not receiving supply from Ukraine
What Will Happen To Steel Prices In The Middle Of 2022?
While no one knows for sure, there are many signs that the volatile steel price hikes that occurred during 2021 will return throughout 2022.
As we mentioned earlier, prices were going down but began to escalate quickly after Russia’s attacks began. It took nearly six months, between the middle of 2021 to the beginning of 2022, for the price of steel to drop $1000 from approximately $1900/ton, at the height of the price increases, to $900/ton. Now, it has already gone back up $300 to $1200/ton in just one price cycle, which is approximately one month. If that level of increases continues, we unfortunately may see a repeat of 2021’s steel prices.
What could impact the market for better or worse has a lot to do with pig iron. Roughly about 60% of the United States’ pig iron, used in the electric arc furnace (EAF) for steelmaking, is imported from Ukraine and Russia. Without pig iron starting to be exported again from Russia, along with Europe dealing with its own major raw material shortage, the remainder of 2022 could see some major spikes in steel pricing for the US.
While the future is always uncertain, we expect pricing to be higher in Q2 than today because of the current unpredictability in the market. In addition to the Ukraine-Russia situation, the price of steel is also impacted by other cost factors that are escalating such as trucking, fuel prices, and additional employee compensation.
What will hopefully help keep pricing down, at least temporarily, is imported steel that’s delivering now, but was purchased months ago. This steel was purchased at a lower price in late January and early March. My best guess is that manufacturers that were lucky enough to order steel at the lowest price of 2022 will blend those costs into the higher priced steel that’s due to deliver a couple of months later.
If you have signed contracts for projects that are due to start in Q2/Q3 , today's price will be cheaper than the future price. This is why it is a great idea to order your steel now for upcoming 2022 projects before prices increase further.
What Will Happen To Steel Supply In The Middle Of 2022?
In terms of supply, steel supply is currently stable with lead times being only slightly higher than they were in January, going up from approximately 4 weeks to 5 to 6 weeks. However, the Russia-Ukraine war, and the shortages as a result of it, may unfortunately last for quite some time and will have a negative impact on supply as the year goes on.
The US will have to rely less on imported steel during the Russian invasion of Ukraine. Most of the imported steel will be re-routed to Europe and elsewhere. On top of that, domestic steel used to be the most expensive in the world and now it’s the cheapest. There’s a strong possibility that the US may have to start exporting steel to other countries which will further impact the steel supply and cause a steel shortage.
At time of writing, we are not on allocation from the steel mills. However, other companies have had domestic steel mills cancel their orders or increase quoted prices.
How Will Metal Roofing Be Affected By The PVDF Paint Shortage In Q2?
Prior to the Russia-Ukraine war, the metal roofing industry was already facing shortage concerns because of the paint resin shortage. Resins are needed to make the PVDF paint system that many of the painted metal roof panels are coated with. The lead times for painted metal products has gone from 4- 6 weeks to now 6 -10 weeks, depending on the color.
Western States Metal Roofing is doing everything possible to minimize any delays. We are currently carrying a larger than normal inventory to accommodate the needs of our customers. We do not expect to have any major inventory issues for the 2nd quarter. As for the second half of 2022, only time will tell as it depends on what happens with the resin shortage.
Should You Buy Your Metal Roofing Now Or Wait?
With pricing looking to increase in the near future and plenty of steel supply in stock, now is an excellent time to buy steel that you know you’re going to need in the upcoming months. With growing uncertainty stemming from the Russia-Ukraine war, we highly recommend securing your project materials as soon as possible.
To get started on your metal roofing or siding project, request a quote today.
