Metalworking industry struggling between raw materials shortage and transportation problems

The metalworking industry is in trouble: more and more companies in the field are struggling to find raw materials on the market. As is often the case these days, the blame lies with Covid-19. 

Mills and factories shutdowns - as well as their slow restart once restrictions were lifted - triggered a lingering disruption to the supply chain, sending prices sky-high. For example, in the US, the hot-rolled coil price benchmark increased by over 180% (more than $800 /s.ton) to reach a new record high of $1,240 /s.ton on 10 March, as stated by CRU. In Europe the situation is not different. The recovery in steel output continues to be insufficient to meet current demand, as several steelmakers are facing technical problems when resuming production. Consequently, EU steel coil prices are expected to continue their hike, reaching record levels in the April/June quarter, tells MEPS.

As a result, long delivery times and rising prices are pushing companies to try to source materials from third countries, but it's not as simple as it sounds. The safeguard measures put in place to protect domestic markets are proving to be a double-edged sword in this situation, complicating the search for new suppliers elsewhere. On the one hand Europe is preparing to discuss the possible renewal of import duties on 26 steel product categories (due to expire on June 30 this year), on the other hand the United States are dealing with the notorious Trump’s Section 232.

However, if in spite of everything companies manage to secure raw materials from overseas suppliers, they face yet another problem. A severe shortage of container availability in Asia has, in fact, skyrocketed freight prices. The reason behind is again quite simple: the pandemic has caused a displacement of containers around the globe for transporting PPE and medical equipment. As reported by the Economist, the cost of shipments from Asia to Europe has risen more than three-fold, making it difficult for companies to absorb it.
Icing on the top, the recent infamous Suez Canal blockage has further exacerbated the situation, heightening the current upwards price pressures in steel and copper.

Although it seems the plot of a tragicomic movie, where the protagonist is always faced with a new problem, more insurmountable than the previous one, it is the current reality of a market in great trouble. The industry associations have already launched the alarm: if the scenario will not begin to improve soon, in some months numerous companies will run out of stock being forced to stop their activity.