In a February post I explained the origins of the steel scrap surcharge. Basically, the base price of steel shot and steel grit is fixed but a surcharge is added (and changed each month) to bring the price of steel to current market value.
Well, the demand for steel in both Asia and Eastern Europe continues to grow and much of the scrap is being sent overseas to satisfy this demand. Obviously, increasing demand leads to increased pricing and even product shortages.
The current scrap surcharge is up about 500% in the past 5 years and has nearly doubled in the past six months. In addition, the lead times are continuing to extend for certain sizes and grades. Unfortunately, it does not look like this is going to be a short term problem unless steel manufacturers can figure out a way to make a lot more steel.
We’re at an all-time high for steel prices but I fear we will continue to say the same thing many times in the near future.