3 Reasons Steel Prices Skyrocketed in 2020

Raw material prices for steel have increased about 60% from the pre-pandemic low in 2020. Prices in the US are forecasted to continue their upward trajectory through at least the first quarter of 2021, but are expected to soften by mid-year.  So what exactly happened?

  • Many businesses faced unplanned shutdowns due to the COVID-19 pandemic, and steel mills were quick to idle furnaces and curtail production instead of risking uncertainty
  • A resurgence in demand in the last months of 2020 while supply and inventory was low drove a rapid escalation in prices, which were further complicated by a raw material scrap shortage
  • Steel mills have aggressively raised prices to take advantage of the shortage, with benchmarks like cold rolled steel coil up 100% in 90 days

Additional capacity is expected to come onto the market in 2021 that will ultimately provide relief, but it’s uncertain when this might happen and how much prices may continue to climb before then. Many of the factors that started driving steel prices higher in 2020 are still at play as we enter 2021, and demand for steel is forecasted to grow by 6.7% in North America this year as the economy rebounds.  Whether prices start to level out in Q2 or H2 of 2021 appears to be largely dictated by the mills, their utilization rates, and what profit margins they want to make while they’re holding all the chips.

What drove steel prices higher in 2020?  Steel production capacity was significantly reduced through 2020 as already slowing demand nearly stopped due to uncertainty in the global economy, and many factories were forced to pause operations during the global Covid-19 health pandemic.  Mills that were able to stay open and operating focused on their larger contract orders, pushing price increases and lead times for smaller customers and leading to a shortage in scrap.

Cold Rolled Coil Steel Prices as of Jan 25, 2021

Many feel that mills have been more aggressive than needed with prices increases and are taking advantage of this supply shortage to pad their margins while demand is strong.  Mills are continuing to hold on aggressive pricing in 2021 and only offering discounts on large volumes.  Lourenco Goncalves, President and CEO of Cleveland-Cliffs, said this of his philosophy regarding mill production: “I have said time and time again that I am for value, not for volume.”  Make hay while the sun shines, as they say.

“Cleveland-Cliffs Northshore Mining – Silver Bay, Minnesota” by Tony Webster is licensed with CC BY-SA 2.0

But the pandemic wasn’t the only thing in 2020 affecting steel.  Transportation costs increased as steel competes for domestic trucking capacity with many other industries that were seeing a surge in demand including lumber products and ATVs.  The price of nickel has also been soaring under tight supply and increasing demand.  Though typically under 20% of the composition of stainless steel, nickel may soon be three times the price of chromium per ton making it the largest cost component in many cases.  Section 232 Tariff on imported nickel is causing uncertainty on decisions to buy foreign nickel with a 3 – 5 month lead time.  Canadian steelmaker Stelco suffered an operations-impacting cyber attack. Pittsburgh-based Allegheny Technologies Incorporated, previously one of the big three, announced they would exit the stainless steel sheet market by mid-2021, opting to shed it in favor of optimizing operations for higher margin business.  And in the last quarter of 2020, we saw signs of life as demand starts to pick back up.  So now we have supply shortages and excess demand where we before had excess capacity and declining demand.

It appears as though we’ll face some other headwinds into 2021 as well.  The Biden administration has highlighted many priorities for the year, and this does not appear to include swift reversal of tariffs or import restrictions.  The Covid-19 pandemic continues to impact supply chains around the world.  Even China, which has recovered more quickly than much of the world has had to implement new lockdown measures after a wave of cases in the Hebei region, which contributes over 20% to the country’s output of steel. Deliveries by truck have been suspended leaving only rail for transportation, and mills are hesitant to tie up cash during a soft lockdown leading to delays and shortages.  Furthermore, demand for nickel isn’t expected to decrease anytime soon, as it’s an important component in nearly every type of electric vehicle battery.  Global demand for nickel specifically for use in EV batteries is expected to grow from 60,000 metric tons in 2018 to some 665,000 tons (an 11x increase) in 2025.

It’s difficult to say exactly when the supply chain will catch up and prices will level off, but according to the American Iron and Steel Institute we should be able to meet demand with current capability.  In the week ending on January 16, 2021, domestic raw steel production was 1,738,000 net tons, representing a capability utilization rate of 76.7 percent.  That’s still quite a bit lower than the 82.4 percent capability utilization rate for the same week in 2020.  Only once the vaccine is fully rolled out in the US and factories are back to operating at pre-pandemic levels will we see the end result of the myriad of factors driving this steep increase in steel.

Intro to the Deform-Nut

What is the Deform-Nut?

The Deform-Nut is a type of mechanical fastener that has a collapsible chamber. Once inserted into the material that is to be fastened, a special tool applies pressure to deform the collapsible chamber around the material, securely fixing the Deform-Nut in place. While similar in concept to a simple rivet, the Deform-Nut creates a male or female threaded attachment point allowing for a multitude of specialized applications. The Deform-Nut is available in closed and open back, a variety of metric and imperial threads, male or female types, aluminum, stainless steel or titanium and a variety of specialized models for specific applications.

What is the Deform-Nut TC/DM?

The Deform-Nut TC/DM is a patented fastening system specifically designed for sandwich panels or sandwich structured composites, which include honeycomb composite panels. It consists of a specialized Deform-nut and a secondary screw. The system combines mechanical anchoring and structural adhesive to provide strong load-bearing threads on hollow core materials that are otherwise very difficult to fasten with traditional fastening methods. Unlike other methods, the Deform-nut is unique in that it is fixed mechanically to the skin of the panel while also anchoring into the core of the panel which is really the structural element of the panel. Using this system, the anchor point is secured to the face of the panel, bonded to the back of the opposing side of the panel, and secured to the core. When properly installed, these anchors can reach pull-out forces of around 500lbs per anchor in tensile strength, and around 377lbs in shear strength depending on the specs of the panel used. The Deform-Nut TC/DM can be used in many composite material panels, including those made from resins, carbon fiber, aluminum, fiberglass, wood, foam, honeycomb, plastics, stainless steel and more.

Test data of ASTM C1254

Where are Deform-Nut TC/DM Used and Why?

The Deform nut TC/DM system is used in any application where a secure or removable connection is required on a sandwich composite panel. These types of composites are most commonly found in building facades, elevator interiors, aircrafts, buses, trains, boats, signage, and any application where the combination of high strength and light-weight is a desired characteristic. One of the most popular applications in recent years is the use of honeycomb stone panels for building facades. In these applications, thinly cut stone is laminated using a structural adhesive to a light-weight honeycomb composite panel. The result appears to be thick dimensional stone but at a fraction of the weight, making them much easier to handle and install. The TC/DM is the perfect fixing system for these types of panels.

For any building façade application, the TC/DM anchor would be mounted to the building using clip and rail systems to allow the panels to be easily and safely mounted to the building exterior. Independent testing has found that fasteners typically fail in Monarch Z Clip hanging systems well before the clip or rail, and an upgraded fastener system including deform nuts can be one way to increase load and overall performance.

How is the TC/DM system installed?

  1. Drill the correct hole from one side of the panel (blind hole)
  2. Insert the rivet nut in the hole
  3. Using rivet nut setting tool, pull up the rivet nut to to attach it to the top skin of the sandwich panel
  4. Inject structural adhesive. Make sure the cavity is completely filled with adhesive.
  5. Insert and screw down the threaded adjusting insert until it reaches the bottom skin of the sandwich panel
  6. Fastener is ready for use (time to full strength is dependent on structural adhesive properties)

The Deform-Nut is a versatile and innovative system for mounting to various composite panels.  To see an installation first hand see the video below. The video even shows a tensile and shear testing to demonstrate the strength and effectiveness of the system.