3 Reasons Steel Prices Skyrocketed in 2020

Raw material prices for steel have increased about 60% from the pre-pandemic low in 2020. Prices in the US are forecasted to continue their upward trajectory through at least the first quarter of 2021, but are expected to soften by mid-year.  So what exactly happened?

  • Many businesses faced unplanned shutdowns due to the COVID-19 pandemic, and steel mills were quick to idle furnaces and curtail production instead of risking uncertainty
  • A resurgence in demand in the last months of 2020 while supply and inventory was low drove a rapid escalation in prices, which were further complicated by a raw material scrap shortage
  • Steel mills have aggressively raised prices to take advantage of the shortage, with benchmarks like cold rolled steel coil up 100% in 90 days

Additional capacity is expected to come onto the market in 2021 that will ultimately provide relief, but it’s uncertain when this might happen and how much prices may continue to climb before then. Many of the factors that started driving steel prices higher in 2020 are still at play as we enter 2021, and demand for steel is forecasted to grow by 6.7% in North America this year as the economy rebounds.  Whether prices start to level out in Q2 or H2 of 2021 appears to be largely dictated by the mills, their utilization rates, and what profit margins they want to make while they’re holding all the chips.

What drove steel prices higher in 2020?  Steel production capacity was significantly reduced through 2020 as already slowing demand nearly stopped due to uncertainty in the global economy, and many factories were forced to pause operations during the global Covid-19 health pandemic.  Mills that were able to stay open and operating focused on their larger contract orders, pushing price increases and lead times for smaller customers and leading to a shortage in scrap.

Cold Rolled Coil Steel Prices as of Jan 25, 2021

Many feel that mills have been more aggressive than needed with prices increases and are taking advantage of this supply shortage to pad their margins while demand is strong.  Mills are continuing to hold on aggressive pricing in 2021 and only offering discounts on large volumes.  Lourenco Goncalves, President and CEO of Cleveland-Cliffs, said this of his philosophy regarding mill production: “I have said time and time again that I am for value, not for volume.”  Make hay while the sun shines, as they say.

“Cleveland-Cliffs Northshore Mining – Silver Bay, Minnesota” by Tony Webster is licensed with CC BY-SA 2.0

But the pandemic wasn’t the only thing in 2020 affecting steel.  Transportation costs increased as steel competes for domestic trucking capacity with many other industries that were seeing a surge in demand including lumber products and ATVs.  The price of nickel has also been soaring under tight supply and increasing demand.  Though typically under 20% of the composition of stainless steel, nickel may soon be three times the price of chromium per ton making it the largest cost component in many cases.  Section 232 Tariff on imported nickel is causing uncertainty on decisions to buy foreign nickel with a 3 – 5 month lead time.  Canadian steelmaker Stelco suffered an operations-impacting cyber attack. Pittsburgh-based Allegheny Technologies Incorporated, previously one of the big three, announced they would exit the stainless steel sheet market by mid-2021, opting to shed it in favor of optimizing operations for higher margin business.  And in the last quarter of 2020, we saw signs of life as demand starts to pick back up.  So now we have supply shortages and excess demand where we before had excess capacity and declining demand.

It appears as though we’ll face some other headwinds into 2021 as well.  The Biden administration has highlighted many priorities for the year, and this does not appear to include swift reversal of tariffs or import restrictions.  The Covid-19 pandemic continues to impact supply chains around the world.  Even China, which has recovered more quickly than much of the world has had to implement new lockdown measures after a wave of cases in the Hebei region, which contributes over 20% to the country’s output of steel. Deliveries by truck have been suspended leaving only rail for transportation, and mills are hesitant to tie up cash during a soft lockdown leading to delays and shortages.  Furthermore, demand for nickel isn’t expected to decrease anytime soon, as it’s an important component in nearly every type of electric vehicle battery.  Global demand for nickel specifically for use in EV batteries is expected to grow from 60,000 metric tons in 2018 to some 665,000 tons (an 11x increase) in 2025.

It’s difficult to say exactly when the supply chain will catch up and prices will level off, but according to the American Iron and Steel Institute we should be able to meet demand with current capability.  In the week ending on January 16, 2021, domestic raw steel production was 1,738,000 net tons, representing a capability utilization rate of 76.7 percent.  That’s still quite a bit lower than the 82.4 percent capability utilization rate for the same week in 2020.  Only once the vaccine is fully rolled out in the US and factories are back to operating at pre-pandemic levels will we see the end result of the myriad of factors driving this steep increase in steel.

Galvanic Reaction: Incompatible Metals Responsible for Corrosion

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During a maintenance check in the 1980s, workers discovered that the Statue of Liberty had a serious structural issue: the statue’s internal wrought iron support system was rusting over because the insulating layer of shellac between the iron and copper had failed and allowed for galvanic corrosion to occur. Although this was not a surefire recipe for structural disaster, it was still a serious structural issue that took millions of dollars and months of work to ensure Lady Liberty’s structural integrity was better prepared to stand the test of time.

While atmospheric and crevice corrosion are some of the most common causes of metal deterioration in structural components, galvanic corrosion, another common culprit of metal deterioration, is just as widespread. Nonetheless, this pernicious chemical reaction is often misunderstood by many members of the construction industry.

As a designer, builder, engineer, or architect who works with exterior metals, you may have heard of the term galvanic corrosion (also known as bimetallic corrosion), or perhaps at the very least, are familiar with the concept of galvanized metals – such as steel coated with a thin layer of zinc to prevent rust – which employ a “controlled” form of galvanic corrosion to achieve their corrosion resistant properties. 

While most people know that galvanic corrosion is dangerous, not many know how it works, how its real world consequences play out in terms of structural safety, and what can be done to avoid it.

This article provides important information about galvanic corrosion and related safety considerations.

 

What is galvanic corrosion?

Simply speaking, galvanic corrosion is the damage or deterioration of metal that takes place between dissimilar metals because of an electrochemical reaction. Specifically, it occurs when two different metals come into contact with each other and have either been submerged or moistened by an electrolyte, with the corrosion taking place around the point where the two metals meet. Additionally, this reaction can be catalyzed by substances that increase the conductivity of water, like salt, and thus the rate of corrosion can vary based on the environment where the reaction takes place.

Galvanic corrosion occurs because each metal has its own electrical conductivity potential. This difference in electrode potential in turn drives a corrosive attack on the positively charged metal (anode), forcing it to dissolve into the electrolyte.

Most commonly, galvanic corrosion can be seen in plumbing systems where a copper pipe is directly connected to a steel or iron pipe. Once in contact both metals can undergo galvanic corrosion because of the electric or galvanic current that takes place at the anode and cathode of the pair of metals.

In addition to environmental salinity, the severity of galvanic corrosion that occurs when two metals come into contact is dependent on several other factors as well, including:

  • The dissimilarity of the two participating metals and the difference between the electrode potentials of each of them.
  • The surface of each of the metal and whether or not it has a protective film.
  • The properties of the electrolyte, including the flow rate, volume, temperature, ionic species, conductivity, and pH.
  • Presence of nearby concrete sealed with sodium acetate.
  • The humidity, moisture, sun exposure, temperature variation, etc. of the local environment.
  • Geometric and physical factors such as surface area, contact point, and the distance between the metals.
  • Metallurgical properties such as the alloy mix, mechanical disturbance, and heat treatment.
  • Other factors such as reversible electrode potentials, chemical reactions, and microbiological contributors.

 

Examples of galvanic corrosion

In addition to the example involving the Statue of Liberty cited at the beginning of this article, there have been several other high-profile examples of galvanic corrosion affecting a structure’s integrity.

Another one of these famous examples involves St. Mary’s Cathedral in Tokyo, a prominent Catholic church built in 1964 with a unique metal design. In 2002, a photograph of the building was released, which showed its stainless steel roof, and while it was dirty, it was totally corrosion-free. However, just a few years later, the building’s roof peeled off during a storm. How did this happen? Well, in the intervening years the non-metal separator between the metal roof and metal structure deteriorated significantly. Once this inert separator was lost, galvanic corrosion caused the carbon steel support system to fail. Unfortunately, this is a common theme among lots of these prominent examples: designers often fail to realize that if a cladding or roof system is designed to last throughout the building’s life, then the same should apply to the structural support too.

Now of course not all of us do work involving ultra modern metal churches in Japan, so what are some more real-world examples of the safety implications of galvanic corrosion that the average architect or designer might face? Let’s say, for example, you want to build a stainless steel facade that’s fastened with screws. Now, if you opt for screws coated with zinc, then the stainless steel will aggressively corrode the zinc because fasteners coated with zinc are attacked by this dissimilar metal from all directions. Obviously this is not good: screws and anchors are vital to structural integrity and with the screws corroding, it could lead to structural failure. Not to mention the ugly rust trails and white corrosion that will bleed down the skin of the building as the metals corrode.

Therefore, it’s only a good idea to choose fasteners coated with zinc on metal if your metal is also the same or has similar nobility to that of zinc. In other words, you can choose zinc-coated fasteners for use with aluminum since it’s much closer to zinc on the galvanic series (a ranking of the molecular similarity of different metals), and therefore less dissimilar which in turn means there won’t be a lot of corrosion. However, you can completely avoid galvanic corrosion by choosing matching metal anchors. So, for example, choosing zinc on zinc would have the lowest risk for corrosion. Use this chart below to better understand what metals will work best together without potential for galvanic corrosion:

Click to Enlarge
Click to Enlarge

 

How to prevent galvanic corrosion

While keeping the reactivity and nobility of metal structural materials in mind when choosing building components is one way to prevent corrosion from galvanic interaction, it isn’t the only way. It is possible to prevent galvanic reaction in metal structures and materials through the choice of proper building materials and components too. Here are some examples:

 

  • Preventing electrical connections: In cases where two dissimilar metals must be joined together, it’s best to separate them with any non-conductive component, like dielectric fittings on pipes.
  • Making use of corrosion-resistant connectors: When joining two dissimilar metals, such as in cases where copper is used with iron pipes, it’s better to use a soldered or brazed joint instead of a threaded or mechanical one since the former is more durable than the latter.
  • Choosing the right size or area of the joined metals: When it comes to joining two dissimilar metals, the higher-noble metal should have a smaller area, and the less-noble metal should have a larger area.
  • Use antioxidants: when working with copper or aluminum use antioxidant pastes.
  • Prevent electrolyte contact: coating metals with hydrophobic substances like grease prevents electrolyte contact, slowing any potential corrosion.
  • Using protective coatings in the right manner: If you’re using an anti-corrosive paint or coating, then make sure that both of the metals are coated instead of just one.
  • Using a sacrificial anode: In some cases, you can also cover the component with a material that serves as a “sacrificial anode.” So when corrosion does occur, it will only chip away the sacrificial anode and not harm the component underneath until all of the sacrificial anode has been corroded (as is the case with galvanized iron or steel which uses a thin layer of zinc as a sacrificial anode to prevent rust).

 

Is galvanic corrosion always harmful?

While galvanic corrosion is generally something that is avoided at all costs, in some industries, a controlled galvanic reaction can be used for extending the asset’s life. Combining a metal to such as one that is higher on the galvanic series can spur the corrosion of the anode while protecting the anode’s cathodes that would have been at risk otherwise. This technique is known as cathodic protection, and while it is expensive, it’s a popular choice for hard-to-reach areas like buried pipelines or ships’ hulls.

 

Conclusion

Galvanic corrosion is an expensive issue which can not only result in ugly rust stains and metal finishes, but is also a serious safety consideration that can lead to catastrophic and deadly structural failure if left unchecked. However, by taking a few measures, it’s possible to ensure that your buildings stay safe from galvanic corrosion. Remember to keep these factors in mind to help prevent and control galvanic reaction and ensure the safety and longevity of your building.

If you need further information about the corrosive properties of the metals we use in our products, please give us a call at (631) 750-3000.

5 Things You Didn’t Know About the Metal Fabrication Process

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Basic metal fabrication involves the forming, shaping, or joining of metal. Typically, this happens through deforming or removing some portions of the raw material.

To many, metal fabrication may seem like a simple one or two step process. But the fact of the matter is, it’s much more detailed and comprehensive than simply pulling metal pieces off the inventory shelf. Here we’ll explore different aspects of metal fabrication to help you be more informed the next time you need to rely on the services of a fabricator:

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Do Metals Contribute to Sustainable Building? You Bet They Do

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While you may think of wood as the main source of sustainable building material, various metals actually play an integral role in keeping the green building industry going. Here’s how metals contribute to the bigger sustainability picture:


They’re RecyclableRecycle Metal

Metals like copper, stainless steel, and aluminum are 100% recyclable which means they can be remade into the same product without sacrificing quality. Recycling metal also reduces emissions and uses less energy than mining, milling, and refining new material. Just to give you an idea of how useful recycled metal can be, here are a few stats you might find interesting:

  • 90% of end-of-life stainless steel is recycled into new products and most stainless products contain about 60% recycled content.
  • Of all the aluminum produced in the United States, around 75% of it is still in use today.
  • Approximately 75% of all copper based products contain recycled copper.

So, from the very start, these metals reduce waste and are energy efficient no matter their form.

They Have Long Lifespans
In essence, sustainability is all about maintaining longevity, reducing waste, and making the environment better for the next generation. Metals like stainless and aluminum contribute to the longevity of a project because, in most cases, they last for decades before they need to be replaced and recycled.

 

Aluminum AngleThey’re Durable and Versatile
Metals like stainless steel and aluminum are durable and malleable, making them some of the most versatile materials to work with. They can be used on all aspects of green building projects, from core construction and interior design to outdoor applications like solar energy panels.

One of the contributing factors to a metal’s versatility is its content. For instance, the chromium and nickel content in stainless steel protect against rust and corrosion which can happen in high temperatures or severe environmental conditions. Aluminum, on the other hand, naturally forms a layer of oxide that is impermeable and repairs itself when damaged.

This kind of efficiency in application and resistance to the elements makes these materials ideal for sustainability.

Other Sectors Rely on Them
The appeal of metal in sustainable building permeates multiple sectors, including those that enable sustainability to continue. Automotive, construction, transport, and tool industries all depend on metals to function. And it’s the innovations of these industries that help green building forge ahead.

What’s the Difference Between Ferrous and Non-Ferrous Metals?

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If you’ve ever shopped around for metal, you’ve likely pondered the difference between ferrous and non-ferrous metals. It’s a question that frequently crops up in metal-related conversations and the answer is surprisingly simple: ferrous metals and alloys contain iron while non-ferrous metals do not. But there’s more to it than that. In fact, ferrous and non-ferrous metals have different characteristics, uses, and price points and it’s important to understand these differences when considering which type is most appropriate for your next project.   

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Metal Finish vs. Surface Finish in Metal Fabrication

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Have you ever ordered a metal part with a certain finish only to be completely confounded by the finish when you actually received it? Perhaps you asked for a smooth mill finish and received a part that looked a bit worse for wear. Or maybe you expected a mill finish and ended up with a sanded finish instead. Whatever the specifics of the mix up, you can likely chalk it up to a very common misunderstanding: the difference metal finish and surface finish. While these two terms may sound the same, they indicate very different processes. Continue reading “Metal Finish vs. Surface Finish in Metal Fabrication”

The 5 Grades of Stainless Steel

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To most people, stainless steel probably sounds like an all-encompassing term. Stainless steel is simply stainless steel, right? Not quite. In fact, there are actually more than 250 different types of stainless steel, all of which can be placed into one of five categories.

Here we’ll explore those five categories and which stainless steel characteristics can be attributed to them:
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What is Annealing and Why is it Important?

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When metal fabricators are tasked with forming complicated parts, they have quite a few tools, strategies, and processes in place to help them get the job done. One important component in their arsenal of tools and knowledge is a thorough understanding of the annealing process.

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Types of Metal Strength

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Whether metal is used to make tools, build skyscrapers, or lay railways, strength is an essential consideration when deciding which metal best suits the job. Strength varies from metal to metal and from application to application. As such, there are several different measures of strength to think about when evaluating metal material options.

Here we’ll take a look at some of the different ways metal strength is measured:

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