Supply Chain Indicators · Roadmap step 11
The increase already happened. It has not reached your invoices yet.
Prepared for Redbud Fabrication, Inc.
00Summary of findings
Over 110 months, the steel PPI leads the price of fabricated structural metal by 4 months, correlation 0.913. That is not a rule of thumb. It is a measured lag with a clear peak, and it is the window you get to act in.
Only 0.46 of a steel move reaches fabricated prices — a 10% steel increase becomes about 4.6% on your side, four months later. The rest is absorbed by somebody. Historically that somebody is the fabricator.
As of June 2026 steel is +14.2% year over year while fabricated structural metal is only +1.8%. The pass-through implies roughly 6.5% is still queued up. On 38M of revenue that is about $2.5M of price movement the market will support and you have not taken.
At 14.2M of steel purchases, this year's input move adds about $2.02M of cost. You have recovered about $0.68M in price. The gap is $1.35M, and it widens every month the quote sheet does not move.
01The question
Redbud asked a reasonable question in a bad form: “are steel prices going up?” By the time that question can be answered from your own invoices, the answer has been true for a quarter and the quotes you wrote in that quarter are already committed at the old cost.
The useful form of the question is: which published series moves before ours does, how much before, and how much of the move actually arrives? That question has a number for an answer, and the number is checkable.
02Sources, and what is real
Real, and checkable. Every index below is a published Bureau of Labor Statistics series, pulled 5 August 2026. The lag, the correlation and the pass-through are calculated here from those series and nothing else.
| Series | Title | Jun 2026 |
|---|---|---|
| WPU101 | PPI Commodity: Metals and metal products: Iron and steel | 366.341 |
| PCU332312332312 | PPI Industry: Fabricated structural metal manufacturing | 290.382 |
| PCU484121484121 | PPI Industry: General freight trucking, long-distance truckload | 204.622 |
Invented. Redbud Fabrication, its 38M of revenue and its 14.2M of steel purchases. Those two numbers scale the findings into dollars; they do not affect the lag or the pass-through, which come entirely from the public series.
03How far ahead the steel index actually sees
Correlation of the year-over-year change in the steel PPI against the year-over-year change in fabricated structural metal prices, tested at every lag from zero to twelve months. Year-over-year rather than the index level, because two series that both trend upward correlate at almost any lag — the rate of change is what carries the timing.
The shape matters as much as the peak. A single high number at one lag would be a coincidence worth distrusting. This rises smoothly to 4 months and falls away smoothly after — which is what a real lead-lag relationship looks like, and what a spurious one almost never does.
Practical reading: the steel number published this month is telling you what your own market price does about 4 months from now. Your quote validity window is the thing to set against it.
04How much of it arrives
The slope of that relationship at the peak lag is 0.456. A 10% move in steel shows up as roughly 4.6% in fabricated structural metal prices. Slightly less than half.
That number is the uncomfortable one. It says the industry does not pass steel through; it splits it. Over a decade the effect compounds: steel is +89.4% over ten years and fabricated structural metal is +102.5% — close, but the fabricated number includes everything else you do, so the value you add has been running just to stay level.
You cannot fix a 0.46 pass-through by quoting harder. It is a structural feature of selling tonnage. It can be changed by selling something whose price is not set by tonnage — which is a different question, and the next step on the road.
05Where the position stands today
WPU101
PCU332312332312
14.2% × 0.456
this year, at your volumes
Read together: the input has moved hard, your market has barely moved yet, and the historical relationship says most of that gap closes over the next 4 months. Firms that move first in that window take the increase as margin. Firms that wait until competitors move take it as cost.
One honest caveat. 0.91 is a strong correlation, not a guarantee, and the pass-through is an average across the industry and the cycle. If demand in your end markets is soft, the increase can simply fail to arrive and the right move is to hold. That is why the recommendation below is a monitoring rule and not a price rise.
06The other two inputs, briefly
Freight — PCU484121484121 — is +21.5% year over year. On structural work it is a smaller line than steel but it is moving faster, and it lands immediately rather than on a four-month lag, because you buy it per load rather than per contract.
These are worth a monthly glance, not a model. The steel relationship is the one with enough signal to act on.
07How to challenge this
- Re-run the lag on your own realised prices rather than the industry index. If your lag is shorter than 4 months you have more pricing power than the industry and the window is tighter.
- Check the pass-through against your own history. If yours is above 0.46 you are already ahead of the industry and this document overstates your exposure.
- Test whether the relationship holds in the 2020–2022 period alone. If the whole correlation comes from that one shock, it is weaker than it looks.
08Recommendation
Do not raise prices on this document. Do three things instead.
- Shorten quote validity to 28 days on steel-heavy work. This costs nothing, needs no negotiation, and converts the entire lag from a risk into someone else's decision.
- Put WPU101 on a monthly review with one rule written down in advance: when its year-over-year change exceeds a threshold you set now, the quote sheet moves by 0.46 of it. Deciding the rule before the pressure arrives is the entire value.
- Re-quote the open book above a set contract value. The 6.5% implied move is worth roughly $2.5M at your revenue; even a fraction of it recovered is larger than most cost programmes.