Between the global pandemic and the economic recession, 2020 was an unpredictable and difficult year for many sectors. While initially the construction industry slowed due to lockdowns, demand rebounded quickly as restrictions began to lift. Much like the rise in lumber prices, steel prices are up a staggering 215% since March 2020 leaving the construction industry the hardest hit.
What happened? During the early months of the pandemic, steel mills shut down or decreased production, expecting an economic depression. However, as the world returned to some degree of normalcy, demand rebounded quickly without significant improvements in supply chain issues. Despite what was a volatile year globally, steel prices have continued to rise and small businesses, especially, are feeling the pinch. Another contributing factor to the rise in costs is the acquisition of two major companies last year by the major steelmaker, Cleveland Cliffs. This leaves The United States Steel Corporation and the Cleveland Cliffs with a duopoly that is driving the steel industry with little to no incentive to increase production.
Rising steel prices, short supplies, and an ever-evolving global pandemic are threatening cash flow for businesses that largely depend on steel to bid and secure new projects. As the Delta variant continues spread globally, potential for lockdowns in China’s main steel producing regions has created uncertainty and could further hurt contractors across the industry who are already shouldering higher upfront costs to complete projects and meet the needs of their clients.
For construction subcontractors, like Lifesaver Fire Protection, the design-build process poses an additional challenge. Project specific orders cannot always be locked in with suppliers until the project has been fully coordinated with other trades, listed, and is ready for fabrication. This creates increased exposure to steel piping price volatility, a direct byproduct of rolled coil steel.
At Lifesaver Fire Protection, we are continually looking for ways to better serve our partners, stay competitive, and mitigate large potential losses in this volatile materials market. Where possible, we have been able to use our well-established relationships with our suppliers to lock in prices and, together, help absorb some of the associated costs for our clients. Now more than ever, keeping clear and transparent lines of communication open is our top priority. While the future of material costs might be uncertain, we are confident we can help our partners navigate these challenging times.