When Will Metal Prices Drop and Lead Times Stabilize?

Throughout 2021, the market has witnessed a dramatic surge in the prices of steel, stainless steel, copper, and other widely-used base metals. This increase has been a challenge for many manufacturers who rely on these materials for their production processes. Fortunately, ESI has developed strategies to navigate market fluctuations and continue delivering cost-effective and sustainable metal solutions to our clients. Over the years, our deep experience with various metals has given us valuable insights into how changing metal prices can impact operational budgets and long-term planning.

Why Are Metal Prices Rising?

According to a recent article published in the New York Times, prices for steel, stainless steel, aluminum, and copper have reached record levels. There are several key factors driving these increases during our post-COVID economic recovery:

1. Tariffs and Reshoring: Efforts by the U.S. to reduce imports through tariffs have already started pushing up material costs. Companies producing steel and other metals are being encouraged to consolidate and bring their operations back to domestic soil. Aluminum importers face shortages from Canada, while the energy storage and electric vehicle industries are competing fiercely for copper and nickel. This reshoring initiative accelerated when the pandemic hit in 2020, and although some tariffs have been lifted, freight shipping costs and truck driver shortages continue to push prices higher.
2. Pandemic-Induced Transportation Disruptions: Supply chain disruptions worsened throughout the pandemic, leading to shortages of raw materials for companies ramping up production in a recovering economy. Freight shipping costs are now at an all-time high, with China’s top 10 ports experiencing an average 126% increase in D&D charges. Domestically, truck driver shortages exacerbated by the pandemic and booming e-commerce sales have created what Uber Freight’s logistics chief described as a “shipping Armageddon.”
3. Global Capacity Challenges: These disruptions have led to a situation where demand for materials has outpaced supply, making it challenging to provide accurate pricing and lead times for manufacturing projects. As industries continue adjusting to these supply chain issues and ramping up production, demand for metal products will likely remain strong. The focus on building clean technology for renewable energy, along with infrastructure investments in the U.S. and China, is creating a perfect storm for sustained high metal prices.

Which Metals Are Most Affected?

While nearly every metal market is feeling the pinch due to supply shortages and high demand, those most commonly used in industrial production are the hardest hit. Manufacturers should anticipate significant price increases in steel, aluminum, copper, and nickel.

• Steel & Stainless Steel: Consolidation and reshoring of steel operations, combined with reduced steel scrap availability, are driving up costs for refining and production.
• Aluminum: Canada, the main supplier of aluminum to U.S. operations, has imposed export quotas. However, our demand far exceeds this limit, resulting in higher prices due to limited availability.
• Copper: Critical for electronics and electrical components, copper is experiencing supply shortages due to increased demand for electric vehicles, infrastructure, microchips, renewable energy, and energy storage.

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When Will Prices Drop?

Although forecasts predict a decline in record-high metal prices as the global economy recovers, they are unlikely to return to pre-pandemic levels anytime soon. The market may remain tight well into 2022, especially with large-scale infrastructure projects underway in the U.S. and China driving demand for these metals. The pandemic is not only impacting prices but also causing longer lead times for certain materials due to shipping challenges. Given the current supply constraints, we recommend adding several months or more to your production timelines in 2022.

Stay Competitive with Cost-Efficient Metal Products from ESI

Due to sourcing uncertainties, many projects are facing delays in lead times. It's crucial for your planning to understand how the metal materials in your project might affect turnaround times and costs—our team at ESI is here to assist with that. To stay ahead, ESI is over-committing resources to ensure we secure the necessary materials for future projects. Our longstanding relationships with metal vendors over the past 30 years keep us informed about these market trends, allowing us to offer alternative design and material suggestions that could result in better costs or faster delivery without compromising your project requirements.

No matter the state of the market, our metal experts at ESI strive to maintain competitive pricing for our customers. We continuously monitor metal costs and trends to guarantee your project is completed in the most cost-effective way possible. For more information on pricing for our metal products and services, contact us today!

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