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Unpacking the Covid Steel Crisis
One of the most vital players in the U.S. economy is the steel industry. Looking back at this past year, it was a one like no other for the U.S. metal manufacturing machine. With COVID-19 disrupting production and the ripple effects of a changing landscape, the state of the steel industry, like so many other industries today, lies in the balance. Here, we’ll discuss how we got to this point and what it means for you.
To look forward, we must look back
The American steel industry saw its most substantial boom a couple of decades after the Civil War. Technological advances allowed for lower costs and higher quality metal products. By 1910, the United States was producing 40% of the world’s steel supply, creating jobs for many and pushing America to become the largest economy in the world. A foundation of steel allowed for a multitude of communities to develop and flourish. It was a story of a dominant industry and a country reaping the benefits.
The modern steel industry
Though still important to the present-day economy, steel production in the U.S. has declined since this initial boom. Factors like the technological advances as well as the increase in global production of steel slowly and steadily decreased the number of employed steelworkers and lessened the need of countries to purchase their steel from America.
It's important to note, however,... The demand for steel did not diminish… In fact, it became the most prized product in the global market.
Why does the demand for steel usually stay so strong?
Steel is valuable for so many purposes, from construction to manufacturing to transportation to countless products. Sometimes easy to forget, it is also the backbone to various everyday appliances like our cars, kitchenware, even the foundation of our homes. Needless to say, it is an essential material to our livelihood and our economy.
From biggest exporter to biggest importer, the U.S. takes a stance.
One of the most significant events affecting the steel industry of late was the 2018 tariffs. As part of an “America First” campaign, high taxes on foreign imports of steel were put in place. As a result, demand began to slow down and the industry was facing a difficult period.
So, what happens when prices rise, production is threatened and the steel industry is put into jeopardy in a scenario such as, let’s say a global pandemic?
The steel industry was still reeling from the decreased demand and tariff repercussions when the COVID-19 pandemic hit. Metals production was all but halted as the majority of work could not be done remotely. A situation whose consequences we’re still dealing with today, over a year later.
After the initial wave of the virus passed and production was cleared to resume once again, the months of little to no manufacturing resulted in a decrease in supply which in turn caused the elevated pricing we’re seeing today.
What does the future hold for the steel industry?
As of now, prices are being projected to continue rising as the iron and steel industry heal from the consequences of the pandemic. This could be helped by the potential lift of the tariffs put in place in 2018 on imported steel. However, with the uncertainty of the future that lies ahead, we can only be hopeful in the fact that the industry supply will catch up with the demand once again.