November 2021 Volume 3

MATERIALS

other hand, the surging price of oil and gas has spurred a renewed interest in developing these resources.The bottom line is that there is demand for steel from a variety of sectors, but at the same time there are concerns regarding how long this demand will hold. Production could ramp up to address the current environment and leave the producers back in the same boat they were in the spring of 2020. That brings us to the most important question of all. When does all this end? What will cause prices to fall and how far do they go when they start to. If one looks at the behavior of steel prices for the last decade it becomes obvious that volatility has been the norm. There have been many episodes of higher prices followed by big plunges. The demand spikes and producers react with an attempt to meet that demand and invariably end up overproducing and prices react accordingly. So, what will make that demand start to flag? It already has as far as construction is concerned. Even though there has been a major improvement in the development of transportation related construction the expectation for office building is not encouraging. Only about 33% of people have returned to their offices and estimates hold that roughly half of employees will remain in a virtual environment for the next several years (at least). The chip shortage is expected to continue plaguing the auto sector through the second quarter of 2022. This will mean only partial recovery in production schedules for the bulk of the year. Most of the major

automakers are warning that it will be mid-year before they are back to normal. The insecurity around the fossil fuel sector will remain as there are dozens of schemes to promote alternatives even as the limitations have been exposed. The natural gas crisis in Europe has many causes but among them is the failure of the wind power plan. The expectation was that this power would replace the need for gas but it only produced 20% of what had been anticipated and suddenly the Europeans demanded far more gas than was available. The best guess at this stage is that price pressures begin to ease by the end of second quarter of 2022. That still means more than six months of higher prices and scarcity. ■

Dr. Christopher (Chris) Kuehl is the author of Quick Read Economic Update and a frequent speaker at industry events. Chris is the managing director of Armada Corporate Intelligence and one of the co-founders of the company. He has been Armada's economic analyst and has worked with a wide variety of private clients and professional associations in the last 18 years. He is the chief economist for the National Association for Credit Management (NACM). He prepares NACM's monthly Credit Managers Index. He can be reached by emailing info@forging.org.

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FIA MAGAZINE | NOVEMBER 2021 37