How steel shortage in the United States created a bubble in the market

The Covid-19 pandemic has thrown supply chains into disarray, and steel – an essential metal used in everything from dishwashers to cars – has not been immune to these disruptions.

“Steel is definitely one example of shortages, price hikes and growing frustration among customers,” Anirban Basu, chief economist at Associated Builders & Contractors told CNBC.

Demand for steel declined at the start of the coronavirus pandemic, but quickly rose. At one point steel prices were 300% above pre-pandemic levels of more than $1,900 per ton. Before the epidemic, the price of steel was between $500 per ton and $800 per ton.

Steel’s high price hasn’t really fallen much, and some fear it’s a bubble about to burst.

“They’ve turned into a bubble. So they’re going up because they’re going up,” CRU Group analyst Josh Spurs told CNBC of steel prices.

Steel is a staple in infrastructure projects, making the Biden administration’s plan to pump billions into American infrastructure a huge boon for manufacturers.

“We estimate that for every $100 billion of new investment in infrastructure, that would mean 5 million tons of additional steel demand,” said Kevin Dempsey, CEO of the American Iron and Steel Institute.

Globally, steel demand in 2021 is expected to increase by 3.8% during 2020, according to World Steel Association.

Watch the video above to learn more about the largest US steel manufacturers, and the impact of tariffs on steel, whether The US steel industry can keep up with demand, and what happens when this “bubble” bursts.

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