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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.
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Factors that Influence Market Value of Metal
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.
What Drives Metal Prices
The Cost of Steel
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
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Prices of Aluminum
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
The Cost of Stainless Steel
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
Prices of Copper
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
Discuss Your Metal Needs with Us
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.Contact us or stop by one of our California or Arizona locations to discuss your metal needs with us today.