Increased demand for steel, especially in China has resulted in a scarcity of raw materials, driving up the price and leading to a rapidly shrinking pool of available resources. Mills are currently working at close to maximum capacity, and coal, ore and scrap metal are in shorty supply. Higher freight charges, due in part to the increased demand by China, have also contributed to the rise in price. Some companies have indicated that they will begin including surcharges on all shipments, starting this quarter, which they say are to cover the added costs from freight charges as well as the higher prices for raw materials and scrap. While some consumers are balking at the additional fees, the high demand and low supply in the market may leave them no choice but to comply.

In the United States steel prices are further aggravated by the weakening dollar, which has reduced the ability for consumers to afford the more expensive imports, putting more pressure on local suppliers. However, US steel producers are competing for the same rapidly dwindling supply of scrap and other raw mtaerials as non-US companies, leading to more pressure on overall price of steel. This situation is compounded by the fact that the United State's depressed economy has led to consolidation and an overall decline in the capacity of the US steel industry to produce to the current demand. The recent removal of the steel tariffs did not drop steel prices appreciably, mainly due to the fact that demand and supply had a far greater impact on price for raw materials and finished products than the tariffs ever did.

While these increases in price have been particularly sharp in the past year, it is important to note that raw steel prices fluctuate like any other commodity, as illustrated in the graph above, and that the overall steel price index has still not returned to the highs seen in the mid 90s. What make these recent spikes in price stand out more is how quickly and how steep the rise has been in such a short period of time.