13 Sep The State of Steel Supply
By: Keith Woods, President of Central Steel Service
In my last blog on the current state of the steel industry, I primarily focused on the dramatic run-up in steel prices over the past year. As of Sept. 10, 2021, the AMM price index for hot rolled steel coil was at $1938/TN, which is up 12 percent in just a 60-day period since July 2, 2021. In my opinion, I think we will see this as the top end of the price; however, we will not begin to see much price softening until early 2022 since demand continues to outweigh available mill supply.
Today, I will focus on the steel supply challenges we are all facing across most major industries, steel included. Although we are all tired of the “COVID excuse,” it remains a real and ongoing issue with producing steel mills as it relates to production losses due to pandemic shutdowns during 2020 and producing mills still playing catch up now deep into 2021. The recent increase in the increase in infection rate caused by the COVID-19 delta variant has only exacerbated these issues.
Producing steel mills have continued to experience greater absenteeism of late causing loss of multiple shifts of production. It can take just one person being absent to shut down an entire shift of production. Unfortunately, replacement employees are seemingly unavailable and, if available, are not trained or experienced to step in in an instant to keep production schedules humming along. These production losses come unexpected and can cause a significant shift in production schedules. Delays in production seem to snowball. For example, a late coil production can cause a missed scheduled tube production that then may extend the lead time of tube production another 6-8 weeks.
Additionally, in an effort to play catch up with past orders, we have recently experienced mill producers skipping production of a certain size or severely limiting the quantity that they will produce off a scheduled mill production. Therefore, mill rolling dates are being filled and closed much sooner than has historically been anticipated causing stock-outs in some items that would normally be available from stock. Production of lighter gauge coils (.071” and under) are now considered “inefficient” to producing mills, who are primarily concerned with throughput.
We are communicating daily with each of our mill suppliers for information, but unfortunately, the information provided remains uncertain and is provided as their “best guess” as to when material can be expected to produce and ship. Recently, while on the telephone with our mill representative inquiring the status of an order, I was told it would be several weeks before the item would be produced. Before I hung up the phone a truck with the material passed by my window being delivered to our warehouse!!! All we can do is pass along the best information that we are provided, and we will continue to do this. Unfortunately, our real service can only begin once material is produced and delivered to our facility, which we have no real control over.
In summary, the steel industry, like most other industries, remains in a difficult supply environment, and we do not anticipate that changing until well into 2022 when some additional mill producer capacities come on line and mill producers can get back to a more predictable schedule. In the meantime, understanding the challenges we face, we all need to trust each other as partners and remain as patient and understanding as possible as we work to service you, our customer, and you and your customers. I would also encourage our customers to inquire sooner rather than later for any requirements they may have upcoming.