Robert P. Murphy said:
Consider the worst-case scenario where the U.S. imports all of its steel from foreign countries, and there is a large probability that there will be a major war in one year, and that if this happens every single one of our suppliers will cut off shipment of steel. What will be the market's response? Will steel continue to sell at its usual price, and will people in the steel industry focus merely on tomorrow's stock prices?
Of course not. If the supply of steel should be completely cut off, the market price of steel would skyrocket (assuming the government does not take steps to prevent "gouging" and "profiteering"). Because of this possibility, speculators today will buy and stockpile huge quantities of steel at the current low prices. (After all, even if the war never comes, they can simply resell the steel at its original price, losing only the costs of storage. Steel is not perishable like milk or tomatoes.)
In addition, if the war is expected to drag on for many years, so that at that point a domestic steel industry would be necessary, then it will be presently profitable for entrepreneurs to refit their factories so that a switch to steel production can be effected relatively quickly should war break out. And if, because of this costly refitting, the firms in question can cover their variable costs (though not their total costs) through production of steel, then the possibility of war (and exorbitant steel prices) will spur a domestic steel industry operating at a short-run loss in the hope of making up for its sunk costs once war breaks out.