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Surging Demand for Steel Fueled by Megaprojects on the Rise

NEW YORK CITY: In the wake of a renewed emphasis on domestic manufacturing, procurement challenges have intensified across various industries, including microchips, HVAC equipment, electrical switchgear, and fabricated millwork. Now, mega-scale ventures worth billions are further exacerbating the pressure on steel sourcing, impacting an array of construction and technology sectors. The Steel Tube Institute, represented by Executive Director Dale Crawford, highlighted the substantial need for steel in emerging megaprojects like chip factories, battery plants, and data centers. These colossal undertakings demand larger quantities of steel conduit compared to traditional nonresidential constructions, thereby escalating the demand for steel in unprecedented ways. 

Recent statistics from Dodge Construction Network reveal staggering numbers, indicating a massive surge in spending on manufacturing construction projects. October witnessed a remarkable 71.2% increase in spending compared to the same month in 2022. Moreover, the data center sector anticipates growth rates of 14% in 2023 and 6% in 2024, with a projected investment of $17.9 billion by the latter year. Scott Keller, an engineer at Gordian, cautioned that these megaprojects are intensifying the strain on steel prices, especially for smaller contractors. Despite a brief respite following labor stoppages, the conclusion of strikes has led to increased demand, driving steel prices upward. This situation could significantly impact smaller contractors, causing heightened costs and potentially longer lead times for residential projects. 

Although there has been a slight 2.5% drop in steel prices in October, Bureau of Labor Statistics data indicates that steel mill products remain nearly 10% lower over the past year but are still substantially higher, standing at 62.1% above February 2020 levels. Anirban Basu, chief economist at Associated Builders and Contractors, voiced concerns regarding the impact on smaller contractors. He emphasized that reduced commercial real estate activity, coupled with higher borrowing costs and financing challenges for developers, is negatively affecting smaller contractors, leading to backlog contractions. 

However, Basu also noted that while steel conduit demand might increase due to manufacturing projects and data center investments, an immediate surge in steel prices within the next year is not guaranteed. Despite these challenges, Sam Giffin, Director of Data Operations at Gordian, hinted at a mild uptrend in steel prices in 2024 due to global trends, reduced international demand from China, escalating costs in the U.S., and supply limitations. Basu provided a glimmer of hope by highlighting that steel pipe and tube, including conduits, represent a relatively small portion of overall steel demand. Consequently, while prices may face upward pressure due to megaprojects, an immediate spike in steel prices within the next year isn’t assured. 

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