How much does steel cost? How are metal prices determined? What is the availability of steel? When will aluminum and stainless steel prices come down?

These are the questions weighing on the mind of every metal buyer these days. The answers come down to some fundamental factors moving the market.

On April 8, Ryerson invited customers to join ‘Cup of Joe’, an open and engaging conversation on these questions and more, hosted by Nick Webb, the company’s director of risk management and commodities hedging.

These are among the topics that were addressed.

Much of the content covered during this presentation had some form of a forward looking statement or idea. Please refer to the safe harbor provision at the bottom of this page

Dealing with the “shortage of everything”

The prices of nearly all metals are nearing five-year highs, with carbon steel prices 30% above their previous record highs back in 2007-2008. 

But it’s not just industrial metal prices that are soaring. The price of lumber, for example, is hitting record highs as well with some estimates calling for the need to add an additional $25,000 in cost to build a 2,000-sq.ft. home.

It has all resulted in what Webb refers to as a “shortage of everything.” This has indeed wreaked havoc on freight rates to get product shipped across the country.

“The pricing discussion has almost become agnostic at this point and the growing concern for many is where to find that next incremental volume of metal needed to continue production,” says Webb.  

He breaks it down:


China’s Impact on Commodity Demand Now

China makes up about 50-60% of the world’s demand and production of commodities. That means any moves made in this part of the world could have a ripple effect across the entire market.

Webb breaks down what some recent comments from Chinese regulators could mean for the global metals market.


U.S. Dollar Slowly Stabilizing

The U.S. dollar tends to have an inverse correlation to the direction of commodities prices. A stronger U.S. dollar, for instance, would act as a headwind to commodities prices.

It has seen a roughly 13% depletion since highs in March 2020 when investors moved out of equities into more “safe haven assets” like the U.S. dollar. But how does it look now?

Webb outlines the current scenario:


The Capacity Utilization Conundrum

Steel prices in the U.S., China, and Europe tend to be correlated. Each has rebounded from lows at the onset of the COVID-19 pandemic, but the extent at which U.S. prices have moved higher has greatly outpaced the other two.

Much of that is related to capacity utilization rates. While steel mills were prudent in taking production levels down in the wake of the pandemic, the rate at which that capacity has come back online has been slower than anticipated. 

Webb puts that into perspective:

A Forecasting Approach

Futures markets represent a forecast of commodities prices. Six months ago, the futures market did not expect steel prices to go above $600/short ton. Yet here we are today.

Futures markets are expecting steel prices to stay above $1,300/short ton for the next few months before dropping in the summer months. But that comes with a few caveats, says Webb.


Green Energy Push Lifts Scrap

As more supply comes online, much of that production is being driven towards EAF (electric arc furnace), which uses scrap metal as a primary ingredient. This is considered a greener approach to producing steel as opposed to blast furnaces, which use iron ore as a primary ingredient.

Could a green energy push worldwide continue to increase demand for scrap? Webb discusses this and what it could mean for scrap prices.


Is the Price of Aluminum Up or Down?

Could supply chain issues that are currently plaguing the aluminum market have longer legs than those impacting the carbon steel market? For that answer, Webb breaks down the current and futures trends related to Midwest Premium and LME prices.


What is the Current Price of Stainless Steel?

Stainless steel lead times are long, and supply continues to deal with underlying issues like plant closures, strikes, and more.

While the market for finished stainless steel is strong, there is some divergence in the underlying commodities (nickel and chrome) that make up the surcharge. Here is a closer look at what that means:


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Certain statements made in this presentation and other written or oral statements made by or on behalf of the Company constitute "forward-looking statements" within the meaning of the federal securities laws, including statements regarding our future performance, as well as management's expectations, beliefs, intentions, plans, estimates, objectives, or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as “objectives,” “goals,” “preliminary,” “range,” "believes," "expects," "may," "estimates," "will," "should," "plans," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. The Company cautions that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact our business are: the cyclicality of our business; the highly competitive, volatile, and fragmented metals industry in which we operate; fluctuating metal prices; our substantial indebtedness and the covenants in instruments governing such indebtedness; the integration of acquired operations; regulatory and other operational risks associated with our operations located inside and outside of the United States; impacts and implications of adverse health events, including the COVID-19 pandemic; work stoppages; obligations under certain employee retirement benefit plans; the ownership of a majority of our equity securities by a single investor group; currency fluctuations; and consolidation in the metals industry. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth above and those set forth under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2019, and in our other filings with the Securities and Exchange Commission. Moreover, we caution against placing undue reliance on these statements, which speak only as of the date they were made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise