Is the Steel Market Bubble About to Burst?

We have all witnessed the effects the pandemic has had on our economy and lives. Although the steel industry initially struggled due to several production shutdowns, there has been a demonstrable surge in steel resulting in a steel market bubble.

What is a Market Bubble?

A market bubble is an economic cycle that is marked by a rapid escalation of market value. This type of fast inflation is often followed by a “crash” or decrease in value. For example, we often associate market bubbles with stock market bubbles or the 2005 United States housing bubble which affected over half of the country. Its burst resulted in a credit crisis which was a factor in the 2007 Great Recession. 

How Did the Steel Market Bubble Occur?

Currently, the steel market is experiencing a bubble due to several factors including the COVID-19 pandemic, steel tariffs, and the reopening of the economy. The pandemic caused several steel mills to shut down. The mills were slow to resume production when the economy began to recover, causing a severe steel shortage. As a result, the supply/demand imbalance resulted in a bubble when the economy reopened. As reported by CNN, steel prices have tripled. They were around $460 a ton last year and are now at $1,500 a ton. Moreover, the steel stock has also mirrored this shift. US Steel has grown 200% in the last 12 months. Additionally, the tariffs on imported steel have added to this pressure.

Who Does the Bubble Impact?

The scarcity of steel and the resulting price escalation impacts all manufacturers and industries that deal in steel. The steel market bubble impacts steel-based items such as computer chips and automobiles. But like any bubble, it will burst and correct itself. According to CNN, Phil Gibbs, the director of metal equity research at KeyBanc Capital Markets, the steel prices are unsustainable and eventually will correct.

As the steel market corrects itself, American Belleville will stay true to our promise of nurturing customer relationships and finding you sustainable solutions. Our cost-effective pricing model and extensive knowledge of the marketplace can be an asset for you during this time–whether it’s finding specific scarce parts or providing a free quote. Contact us with questions by filling out the form below or by calling 440.721.8350.