Regardless of industry, supply and demand often dictate pricing. Pricing for base metals (non-ferrous metals including aluminum, zinc, copper, nickel, and lead) as well as steel and ferrous alloys is contingent upon many factors, some of which are outlined below. The cost of metal and its fluctuations are valuable and a barometer of change in the world economy.
Understanding what factors into market metal costs can give you a better understanding of why prices rise and decline, often in short periods of time. Knowing what to follow can help buyers know when to stock up or operate with more of a “just in time” manufacturing thought process.
The cost of metal is directly related to supply and demand components, including:
Cost of raw materials
Scrap metal costs factor into metal pricing, where limited supply and resources can increase raw material pricing
Energy costs
Production costs in relation to energy expended with producing metals factors into overall metal pricing
Shipping costs
Freight shipping and fuel can also determine metal pricing. Rising fuel prices can equate to rising metal prices
Global supply and demand
Demand across multiple industries that utilize raw materials coupled with limited supply can create a higher cost of metal. Increased demand from one region of the world can affect the cost of metal for other regions
Seasonal demands
Many industries with seasonal demands such as construction affect fluctuation in metal pricing
Industry factors
Individual industries like the automotive industry can impact metal pricing. Specific components related to industrial production can also dictate fluctuating metal pricing.
Policies & Regulations
Tariffs and quotas can impact the supply of metal imported/exported, which would impact the pricing of metal. Environmental policies can impact production and therefore metal price fluctuations as well.
Futures markets
Global forecasts often show projections of metal price increases or decreases, largely dependent upon industrial and production factors that overlay economic projections.
As previously discussed, there are many factors that dictate prices of steel. Other factors such as raw materials (iron ore and scrap which are used to make steel) reflect fluctuating steel prices and the cost of production. Additional factors that contribute to the cost of steel include:
Inventory refilling
*These factors are indicative of aluminum, stainless steel, and copper costs however, these metals are traded as commodities. View Steel Products
With aluminum being a popular choice among construction and manufacturing sectors, factors that play into the price of aluminum include the construction industry and the automotive industry. Supply and demand within both industries play a pivotal role with the cost of aluminum.
Aluminum can be tracked via 2 commodities exchanges, LME and MWP.
Globally, LME (London Metal Exchange) is used for aluminum pricing
MWP (Midwest Premium) reflects commodity pricing for aluminum in the Midwest
Mill production (or lack thereof) plays a strong role in the cost of stainless steel. Tariffs and export quotas also factor into play, with production supply and demand increasing stainless steel prices.
Stainless steel surcharges are added to the base price of raw materials to stabilize cost fluctuations
Like other base metal materials, copper prices are largely influenced by global factors. Economic growth and futures markets can help forecast supply/demand issues that may arise due to economic trends that directly affect the cost of copper.
COMEX copper futures reflect the commodity market for copper pricing
With extensive experience working with a variety of metals, IMS offers metal contracts to help lock in metal prices during periods of market fluctuations. Make sure you are well-stocked with the metal you need as lead times and tight supply can wreak havoc on your projects.
