Steel prices are up 219% since early 2020. What to expect next

That includes steel, with prices up 219% since Jan. 1, 2020. The benchmark price for hot-rolled steel hit $1,880 on Friday. Prior to the COVID-19 pandemic, it traded in the $500 to $800 range.

The exorbitant cost of steel is driving up prices of everything from new cars to grills. The high consumer demand for those same marked-up products is partially responsible for the steel shortage. When the pandemic first struck, states went into strict lockdowns that saw steel mills reduce production. The mills, with limited supply, were caught off guard when stuck-at-home Americans started going on buying sprees. Money that would have normally gone into travel or dining out soon poured into sprucing up homes with steel-intensive products like dishwashers and dryers. Plus, a pandemic homebuilding boom further increased demand for those appliances. That combination of elevated demand and low supply caused prices to soar.

Steelmaking titans like United Steel Corporation and Cleveland-Cliffs—which last year acquired AK Steel for $1.1 billion and U.S. steel mills from ArcelorMittal for $1.4 billion—are trying to ramp up production. However, their plans are getting held up by an increasingly tight labor market.

“The long-anticipated addition of U.S. steelmaking capacity continues to be delayed, with steel mills facing numerous disruptions to their original plans,” Grace Asenov, a U.S. steel expert at Fastmarkets, which analyzes commodities, told Fortune. “Supply chain, distribution and sourcing, and labor issues triggered by the pandemic have wide-reaching implications, and the construction and startup of new steelmaking capacity has not been immune to these challenges.”

So when will steel prices finally correct?

Fastmarkets foresees hot-rolled steel peaking in the third quarter of this year—which ends on Sept. 30—at around $1,900 to $2,000 per ton. Then, Asenov says, that will be followed by a “modest downward correction in 2022” as steel mills finally begin to catch up with demand.

“Fastmarkets forecasts U.S. HRC [hot-rolled steel] prices to average $1,250 per ton next year,” said Asenov.

But even if steel falls to $1,250 next year, that would represent only a 34% correction. Meanwhile, lumber prices are down 71% since peaking in May. Why hasn’t steel followed in lumber’s footsteps? As Fortune previously reported in July, unlike wood products, steel is less dependent on DIY projects—which have been cooling down a bit from their peak in March this year and thus driving lumber prices lower. Many industries that are steel-intensive, like oil and gas, are seeing demand go higher as the economy continues to rebound.

Indeed, even more steel demand could be on the way. Once the global chip shortage is alleviated, carmakers—which have been backlogged because of the shortage—are expected to ramp up production. And that, of course, will require a lot of steel.