The steel industry in the United States enjoys a high degree of protection from the government. High import tariffs mean that most of the steel used in construction is produced domestically. When there are massive shocks to the industry (such as a new respiratory virus that infects 10% of the population), a unionized workforce keeps steel production relatively steady. Even so, the steel industry has not been immune from the turmoil of the last year: Prices have surged in the last six months and are only just beginning to peak.

American steel producers benefitted from several pandemic relief bills. Subsidies helped keep plants operating (or at least keep staff on their payroll), which has made supply issues far less severe than they could have been. Furthermore, remote work and social distancing have spurred demand for residential construction in many markets. This kept many construction firms operating throughout the pandemic. When domestic consumers want more steel than producers can provide, imports normally increase. This is beginning to happen, but foreign producers must grapple with protectionist policies at home and import
tariffs in the US.

The primary driver of demand for steel in the construction industry is the nonresidential sector. With the surging delta variant reigniting fears of a new lockdown, companies are again beginning to put new projects on hold. There is concern that residential construction – which has been something of a lifeline for the industry – will decline before the rest of the market recovers. If that happens, steel prices will almost certainly drop, but there will be much less construction overall.

Even so, labor costs have been steadily rising. Labor costs normally make up about 70%-80% of materials costs, meaning that although raw materials are expected to become cheaper, the price that contractors  pay will rise. Contracts are normally negotiated in advance, and therefore add some stability to commodities prices.