Steel prices continue to rise and rise with longer delivery times
There are difficulties in finding steels and delivery times are getting longer. What is happening? Read this article to find out the reasons.
Spectacular growth in China
China’s economy grew by 18.3% in the first quarter of 2021 (compared to the first quarter of the previous year). And China’s appetite for commodities again appears to be outpacing the pace of economic growth.
For example, iron ore imports totaled more than 102 million tons in March, up sharply (nearly 8%) from the dismal Covid-affected March 2020 levels.
China exported 7.54 million tons of steel products (up 23.8% from a year earlier) and imported 1.32 million tons (up 17%) last month.
This is indicative of a frenetic industrial activity.
There is a belief/hope that this is a foretaste of what could happen in the Western in the event of a pandemic under control.
In the US, retail sales also grew more than expected: 9.8% month-on-month in March (27.7% compared to March 2020). It should be noted that the biggest rise was in motor vehicles (15.1%).
But there are other reasons, service center inventories are at lows not seen in years. We could say that inventories are not stable right now. Protectionist measures, implemented as a good idea, have now closed off suppliers of steels and stainless steels from third countries. In reality, some do not find great advantage in importing materials from Asia.
There is also some panic in the stockpiling of materials by customers, who are trying to prepare the production for the coming quarters. It should not be forgotten that the pandemic has brought change in consumption habits by shifting the balance of regular buyers.
This is reflected in the commodity indices since the beginning of the year.
For example, the Bloomberg Industrial Metals Subindex.
Same in the case of the S&P GSCI Industrial Metals
Or the iron ore price:
Implications of the explained.
Steel mills are focusing their efforts on historical customers leaving aside new projects. Allocations are also occurring, which means that buyers may not get the amount of steel they need. This situation extends to all semi-finished products: flat products, round products, extrusion, etc., which is a sign of the extremely complex moment we are going through, where all the players are coping as best they can with this situation.
Our scenario
It is possible that the price of industrial metals may have reached or is close to this year’s highs, but we believe that price turbulence and difficulties in finding raw materials could be extended well into the third quarter. On the other hand, we think there will be price increases next year.
Disclaimer: The content of this article is non-binding and reflects our view and is not a recommendation to buy or sell any asset, and you cannot take as indication of future results. Each buyer must do his own analysis. Although we took all reasonable care in writing this post, it is possible that the information in it is incomplete or incorrect or may differ of what you know. Please remember that the indicated data and our views are subject to change without notice and we have no obligation to update the information contained herein.
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