Rising Steel Costs Affect Industrial, Construction Buyers

Rising Steel Costs Affect Industrial, Construction Buyers

Steel prices are expected to increase at an annualized rate of 2.2% between now and 2017, causing higher prices for security wire fencing, nails, elevators, building demolition machinery, and equipment and forklifts.

Steel price increases will hit buyers hard, as many products rely on steel as their most valued resource. A new report from IBISWorld predicts steel prices will increase at an annualized rate of 2.2% over the next three years. In 2009, the industrial and construction industries tanked, causing steel prices to decrease by 25%. From 2011 to 2014, prices continued to decline at an annualized rate of nearly 4%. Now, construction and industrial operations are expected to remain strong and buyers will be met with higher prices for steel through 2017.

IBISWorld examines the five products that will most likely see accelerated price growth: security wire fencing, nails, elevators, building demolition machinery, and equipment and forklifts.

Steel accounts for 25% of suppliers’ total purchasing cost for security wire fencing. Between now and 2017, the value of construction is expected to increase at an annualized rate of 8%. Higher demand and increased steel prices will cause the price of security wire fencing to rise. IBISWorld projects the price of security wire fencing to increase at an annualized rate of nearly 5% through 2017—a higher rate than the 3% during 2011 and 2014.

Nails also rely on steel, which accounts for 86% of its total purchasing cost. The previously mentioned growth in the construction and manufacturing industries affects the nail price growth, which is projected to increase at an annualized rate of nearly 4% from now to 2017. This increase is also due to the nearly 10% increase that housing starts expect to have.  

Elevator demand depends on building activity. Between 2014 and 2017, the value of private nonresidential construction is expected to rise at an annualized rate of nearly 8%. Higher demand along with increasing steel prices drive elevator prices high. Steel accounts for 36% of the average elevator manufacturer’s purchasing costs. Elevator prices are forecast to accelerate to an annualized rate of 4% between now and 2017.

Building demolition machinery and equipment depend on the level of construction activity. Steel is the metal of choice for production—so much so that steel accounts for 80% of supplier’s total revenue. The price of machinery and equipment is expected to increase at an annualized rate of almost 4% from 2014 to 2017.

Finally, as industrial production picks up, the industrial index forecast is expected to increase at an annualized rate of 3% from now until 2017. This coincides with greater demand for forklifts, in which steel accounts for 63% of the average forklift manufacturer’s total purchase cost. Because of this, forklift prices will increase at an annualized rate of 3% in through 2017.

TAGS: Industrial
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