The Steel Shortage, Rising Prices, and How It Affects the Equipment Market

The reality of the steel shortage

An unembellished shortage in steel is the current plague clouding the manufacturing industry.

The effects of the pandemic were dwindling. Manufacturers expected an end to many of their troubles. Unfortunately, that has not been the case. All indicators point to a continued plague known as the steel shortage. 

Steel is a raw material that many fields use, so the effects of the steel shortage span numerous industries like construction, automotive, consumer applications, heavy machinery, energy, and transport. 

While these are not the only industries that heavily rely on steel, the effects of the shortage are like a ripple. For example, the retail sector will have to cope with shortages created by a lack of products and goods that are related to steel. 

Steel inventory is depleted, supplies are diminishing at an alarming rate, and the future is not bright. 

What led to the steel shortage and why is it getting worse with time?

According to industry analysts, the following events are responsible for the current situation.

  1. Steel manufacturing plants were closed in response to COVID-19 from June 2020.

  2. Tariffs, trade wars, and shutdowns greatly impacted steel imports.

  3. As a result of shutdowns in major manufacturing plants, there was a short period of reduced demand for steel.

  4. Due to prevailing events, budget cuts, and working conditions, there was a reduction in the number of steelworkers available in the industry.

  5. Inventory levels in warehouses started to go down because there was no additional supply of raw materials. The inventory level continued to go down and hit an all-time low.

  6. Mines were closed down or affected by the pandemic, putting a strain on the supply of raw materials.

  7. Some mills fell victim to cyberattacks or faced frequent strikes amongst the workers. 

The events led to a sharp decline in steel supply and eventually, a colossal steel shortage. The issues continue compounding, and the industry’s major players and supportive branches are in a tight bind.

What are the effects of the steel shortage?

The shortage means that steel is no longer accessible to most manufacturers. Most of them have been forced to find alternatives if they can’t wait for the supply chain to provide them with the material at an unspecified date.

Consequently, the price of steel has been affected as well. It has become more expensive due to a sharp spike in demand. The laws of supply and demand hit hard, particularly when businesses started to open up and resume operations. Since August 2020, the price of domestic steel has increased by more than 160%. 

Manufacturers who heavily or wholly rely on steel as a factor of production are now wedged between the devil and the deep blue sea. The access that they had previously has now turned into a difficult task. The challenges of accessing steel have been made worse by its high cost, and the profit margin has diminished.

The production time of steel has also increased, even with workers putting in countless hours of overtime. Most mills are already overwhelmed by the number of orders that they have to fulfill and can’t accept new clients.

According to HIS Markit’s price forecast, even though costs have hit an all-time high, they could rapidly come down soon. Ideally, the steel supply chain will recover to its pre-pandemic posture.

Even with the supply problems that are in the market, analysts advise against price locking measures. They recommend that companies should wait and buy later if they can. This move doesn’t address the problems faced by manufacturers whose operations have been held up by steel shortages. 

When is the steel shortage likely to end?

No one knows for sure when the situation will be relieved, but we don’t expect the shortage of steel to go away soon. Fortunately, more than half the whole world is resuming operations. 

The biggest problem with the current situation is that production is behind schedule. Orders, and consequently demand, continue to increase. However, the supply chain won’t recover as quickly as anticipated. Industries closely related to steel will face continued shortages. If there is no steel, product development and construction won’t prosper. 

It is difficult to predict what will happen and how things will end up. Things are looking up, though we must find a solution for the huge steel supply deficit. 

What are the alternatives to steel?

It is high time the focus shifted to material alternatives because every other day, demand is surging, prices are soaring, and the supply is dwindling at an astonishing rate. 

Unfortunately, no materials can serve as steel alternatives in terms of functionality, cost, and durability. The dominance of steel arises from its outstanding resistance to corrosion, strength, and fair cost price. 

If materials such as superglass, titanium, and aluminum are improved in the future, they may serve as viable alternatives that could function in place of steel. Aluminum is quite brittle and unstable at higher temperatures. Titanium is strong yet lightweight. However, it is expensive for most industrial uses and changes structure at high temperatures. Metallic glass is tougher but needs to be blended with palladium, a rather expensive element. If innovators spot an affordable material that can replace palladium, then superglass may be explored as a potential alternative to steel.

Bottom line 

Around the world, manufacturers continue to face an increasingly alarming steel shortage that has impacted all industries. Many factors contributed to the shortage, including the pandemic, tariffs and trade wars, reduced workforces, low inventory levels, closed mines, cyberattacks, and personnel strikes. No one knows when the steel shortage will end, so it may be time to focus efforts on steel alternatives. 

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