The price for U.S. steel has been exploding this year in what has been an enormous turnaround for one of the country’s most important commodities—used to make everything from buildings and bridges to cars and spoons.
This has already been playing out on the broader market. The NYSE Arca Steel Index, which includes publicly traded companies in the steel sector, is up more than 38% from the beginning of 2021, though it was trading down about 2% on Monday, June 14.
UBS forecasted earlier this month that the price rally for steel may continue into the first half of 2022 at the current trajectory—to the benefit of companies like steel industry giant Nucor, which just posted a record quarter, and some U.S. steel mills so backlogged they have stopped taking new orders for the summer.
“Many of our product groups are running at or near full capacity,” Leon Topalian, CEO of Nucor, said in April during an earnings call, noting that the company has been been adding shifts “to meet robust market demand.”
These price surges have been driven by supply constraints, according to UBS. Steel mills have also gained pricing power owing to consolidation, UBS equity research states.
UBS surveyed 80 steel operators in the U.S. and found that more than half of them expect prices to further increase over the next three months, according to a June 11 equity research report. And 79% of steel industry operators in the U.S. say year-over-year demand will rise over the next quarter.
The price boom follows years of turbulence for the steel industry, which experienced a severe downturn following the 2008 financial crisis. Increased competition from foreign countries entering the market has eliminated the need for hundreds of thousands of jobs over the past several decades. Some steel companies, including U.S. Steel and Cleveland-Cliffs, had reduced capacity before the pandemic and are not considering reopening those mills at the current price levels.
The coronavirus pandemic caused significant declines in production across the world in the first half of 2020, but especially in Europe, North and South America, and Africa. But by the end of last year, steelmakers were struggling to keep up with the influx of orders. In the U.S., Trump-era tariffs on foreign steel have also helped lift domestic prices.
Of course, it’s not just steel that has been getting more expensive—the cost of raw materials to make just about everything in the U.S. has been on the rise as economy reopens. For example, the price for lumber is up 288% since April 2020.
How long price surges like this will last is unclear—as extended periods of rising commodity prices are rare. But if UBS’s predictions are accurate, construction costs may not be getting cheaper anytime soon.
More must-read stories from Fortune:
- 12% of the world’s population has received a COVID vaccine. See how your country is doing
- Why Japan refuses to work from home—even in a deadly pandemic
- “Ugly” produce is finally finding a second life on the shelves of major grocery chains
- Commentary: The psychology behind why some leaders are resisting a hybrid work model
- 2021’s Fortune 500
Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.