5 Factors that Increase Steel Prices and Drive up Building Costs
Steel is a major commodity in the Global Economy, and the factors that influence steel prices are often complex.
Because the steel industry is part of the competitive free-market, prices remain relatively stable over time. However, price fluctuations do happen and can have a significant effect on the final cost of constructing a new metal building.
To help you understand why steel prices fluctuate and how they might affect the final cost of your new steel building, we’ve identified and explained the 5 major factors that increase the price of steel and how those factors can directly or indirectly drive up the cost of your Metal Building.
5 Factors that Influence The Price of Steel:
- Cost of Raw Materials
- Oil Prices
- Supply & Demand
- New Tariffs
1. Cost of Raw Materials
Iron ore and scrap metal are the main materials used in manufacturing new steel. Iron ore prices are impacted by mining and refining operations and the cost to ship ore from the refinery to the steel manufacturer.
The availability of scrap metal used for recycled steel production can also affect costs. If more buildings are being demolished, there is greater availability of raw materials and so steel costs are reduced.
However, if new buildings are also being constructed at a high rate, the price of steel will continue to rise due to limited materials. When the cost to procure steel increases, companies often respond by increasing the price of their steel products.
All metal products from soda cans to sports cars may reflect price increases.
The price of steel is subject to price fluctuations from weather phenomena.
If it is hurricane season, or a bad storm damages a barge that is shipping steel between countries, prices will reflect these weather changes.
The more arduous the journey, the higher the cost to ship.
3. Oil Prices
The price of oil is perhaps the most influential factor affecting the price of steel. Oil and Steel have a strong cost correlation that is based on international shipping.
When oil is cheap, it costs less in fuel to send steel materials to the US from overseas countries. However, when oil prices increase, the price of steel also goes up because it is more expensive to ship.
Even if steel is produced completely in the US, the steel prices will still mirror the international price of oil.
This correlation occurs because increased oil prices raise both international and domestic shipping costs and because the steel industry has a tendency to maintain a global “market price.”
If you compare the price of oil and the price of steel over time, the graphs tend to peak and dip simultaneously.
To read more about some of the most common questions about metal building check out our article Metal Buildings FAQ's.
4. Supply & Demand
Just a few years ago, China was responsible for so much of the world’s steel production that the cost of metal was reduced globally. However, the US and the EU have since imposed tariffs to try to shift steel dependence away from China and back to local production.
These tariffs have caused China to decrease its steel production, creating a lower supply worldwide than there is a demand. China has decreased its steel exports to the US and steel producers are still behind in supplying enough steel to keep up with corporate demands.
The lag in supply is driving up the price of steel buildings. Until equilibrium is reached in steel manufacturing, these price increases will likely continue.
5. New Tariffs
Fluctuating steel prices have been the focal point of recent news stories. President Trump’s recent tariffs on steel and aluminum have driven up U.S. steel prices and are affecting the cost of new Steel Buildings.
Tariffs have increased the cost to import steel to the U.S. from other countries including Canada, Mexico, and China. These tariffs were put into place to protect American Steel Manufacturing Plants and to keep U.S. steel prices competitive in an international market.
There is a common misconception that import tariffs on foreign steel only raise prices for builders who use foreign steel. However, even companies that use only 100% American-made steel in their buildings receive price increases from metal building manufacturers shortly after new tariffs are announced.
What Does All of This Mean for Your Metal Building Cost?
Higher Costs for Building Materials
The most apparent way steel prices can increase the final cost of your Steel Building by increasing the cost of building materials.
When the cost of steel increases because of Raw Materials Cost, Weather, Oil Prices, Supply & Demand, New Tariffs, or some combination of these 5, your building will be more expensive.
Even if the cost of labor, shipping, windows, flooring, and more are all the same price, higher steel prices mean a higher price tag for your building.
While the rising cost of domestic steel is great news for American steel manufacturers, there are difficult economic consequences for steel consumers, including those purchasing Metal Building Kits.
Builders Charge Hidden Fees to Mask High Steel Prices
A less obvious way that steel prices can drive up costs to erect a Pre-Engineered Metal building is through shady business practices.
In order to draw customers in, some steel building suppliers will quote low prices for steel materials and then charge hidden fees to make up for the increased price of steel.
These businesses attract customers by quoting materials costs that are significantly lower than competitors and then include multiple unexpected charges on the final bill to make up for the initial price discrepancy.
Protect yourself against these deceptive business tactics by locking in a fixed quote for your building before construction begins.
You can also ask the builder directly if they are providing a pre-tariff price and determine what additional fees you should expect.
CDMG offers transparent, trustworthy design services for metal buildings of all sizes. If you are considering a new building construction, consider contacting CDMG for a quote from a design firm with an outstanding track record of client satisfaction.
Should I Wait to Construct my Metal Building Until the Price of Steel Stabilizes?
The short answer is, no.
While it might seem off-putting to begin constructing a Metal Building when the price of steel is on the rise, right now is the optimal time to begin construction.
It seems unlikely that steel prices will decrease anytime soon and the cost of steel is rising continually. As long as the supply and demand for steel remain unbalanced, prices will continue to increase.
Erecting a pre-engineered steel building will likely cost less now than it will in the not-too-distant future.
In addition to the rising cost of steel, the growing economy will lead to increased interest rates due to inflation. Businesses looking to build will do better to begin construction as soon as possible to avoid further increases in building costs and loan interest fees.
As long as the economy is doing well and companies continue to build, the steel industry will continue to increase already rising building costs.
Despite fluctuating steel prices and a turbulent global economy, steel buildings are unmatched when it comes to high-durability and longevity for the price.
Even with increased prices, pre-engineered steel building kits are more affordable than traditional construction methods and last longer. Not only that, but with building an eco-friendly steel building, it can help you save money going into the future.
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