Demand for steel is so strong that some factories have stopped taking orders | Business
The steel industry is booming like never before as the global economy recovers from the pandemic, and the ripple effects are being felt by everyone from home builders to home appliance makers.
Demand is so frenzied that U.S. steel mills have stopped taking customer orders in recent weeks, according to Dan DeMare, sales manager at Heidtman Steel Products Inc. DeMare said the steel mills may not start taking new orders until. the end of the summer so that the delays can be eliminated.
In a global economy already rocked by supply shortages and inflation concerns, factory moves may signal more delivery problems and even higher prices for a key product for a wide range of industries. Around the world, about 500 pounds are used per person each year, in everything from paper clips and automobiles to skyscrapers and toasters.
In the United States, steel has tripled in 12 months as the faster-than-expected economic recovery surprised producers, while in China, futures hit a record after authorities pledged to cut production for the purpose of controlling emissions. Prices have also increased in Europe, so imports could only increase by a certain amount even if the United States lifts the Trump administration’s tariffs.
âThe sharpness and speed of the movements were something like I have never seen before,â Phil Gibbs, analyst at Keybanc Capital Markets in Cleveland, said in a telephone interview. âI’ve been covering this area for almost 15 years now, so I’ve seen some pretty crazy runs. “
While prices have surged for all commodities, the 220% jump in US steel over the past year overshadows other high-profile commodities such as copper and crude oil. A Standard and Poor’s index of steel companies, which includes Nucor Corp., Cleveland-Cliffs Inc. and US Steel Corp., is up 69% in 2021, by far the benchmark’s best performance in the five first months of the year.
The rally seemed unimaginable to steel executives just 10 months ago, who said it could be at least 2022 before demand for metals returned to pre-pandemic levels. The rapid recovery and slow ramp-up of steel mills have depleted stocks that were already low at the height of the pandemic.
Lumber, a market where producers have also been taken aback by a surprise increase in housing demand, is one of the few materials to have recorded comparable gains. And even home builders have to consider the impact of tight steel supply.
Carl Harris, who spent 36 years building homes, said he envisions two-month delays on refrigerators, stoves and dishwashers. Delivery times that are normally two to three weeks are now six months in many parts of the country, he said.
The lag means Harris can’t install the appliance package to market the empty two-bedroom nesting house in Newton, just outside of Wichita, Kansas, even if the rest of the house is ready. He said other builders in the area are also struggling to secure plumbing fixtures, which must be in place before a certificate of occupancy is issued.
Ford Motor Co. executives said on a first-quarter conference call that the company saw commodity prices rise primarily for aluminum, steel and precious metals. He expects an increase of about $ 2.5 billion in raw materials from the second to the fourth quarter, “so that’s going to hit us for the rest of the year,” said John T. Lawler, chief financial officer of Ford.
There are signs that the supply crisis could improve.
U.S. steelmakers are expected to build up about 4.6 million tonnes of annual production capacity by the end of 2022, an increase of about 4% from current levels. Additionally, the surge in prices has given President Joe Biden’s administration a reason to consider removing Trump-era tariffs on steel imported from the European Union.
And in China, the world’s largest consumer and producer of steel, the government has repeatedly reiterated its commitment to curb record production since late last year. Yet factories across the country are producing unprecedented volumes of steel.
But for now, steel customers looking for immediate supplies, or spot metal, have to pay more and wait longer.
âThere aren’t a lot of spots available,â Heidtman Steel’s DeMare said in an interview. The factories “have limited their order books, capped the number of orders so that they can start to catch up.”