Perfect storm of steel shortages and increased prices

Price hikes in steel, plus global shortages, have created a perfect storm for the window industry, which could potentially affect the production of PVCU windows in the UK, according to correspondence seen by Glass Times.

Meps International – a market analysis company specialising in independently researched global steel prices, indices and forecasts – reported in December 2020 that European steelmakers were raising prices on an almost daily basis.

“The ever-changing market conditions are creating difficulties for buyers down the supply chain,” Meps said. “This is being exacerbated by lengthening delivery lead times, with shipments from the mills now quoted at dates well into the second or even third quarter for certain product categories.

“Consequently, buyers are panicking about securing the material that they will need in the coming months. This could have a detrimental impact on activity levels at several manufacturers in the first half of 2021.”

Maintenance outages were also scheduled in January at several steel production facilities.

As it stood in the middle of January 2021, steel suppliers were reporting a recovery in end use demand for steel, to the point where “demand is higher than supply for the first time in many years”, according to one well-placed source.

“Market prices have escalated significantly between summer and now, well into three-digit increases, with further large upward moves expected into early 2021 and beyond,” they said.

The estimated price rises from Q3 2020 to Q2 2021 could be between £250 to £300 per tonne.

They went on to say: “We have seen large price increases before, however, material was always available and therefore the bubble lasted just a short while.

“This time it is different. Steel is in short supply all over the world. Covid is still with us and will be for a while, meaning the mills are less likely to re-fire their shut-down blast furnaces ensuring steel remains tight.”

This isn’t an isolated opinion. One other well-informed source said the cost of iron ore was at a nine-year high, steel-making on a global scale had reduced, and China had become a nett importer of steel for the first time in around a decade.

“Current market outlook is for prices to continually rise until at least April,” they said. “We may then see a stabilisation. Our current prediction is steel capacity will be short until around July.”

Neil Evans, managing director of Veka, said that the pressures on supply shouldn’t encourage window fabricators to take their eye off the ball when it comes to quality of supply.

“Our industry is facing many challenges with the pandemic and Brexit, including supply issues,” he said. “The current global steel shortage doesn’t just affect our industry, it affects everyone. In order to protect our customers and secure supply of the right steel specification, we have agreed price increases with our steel suppliers.

“While we are currently absorbing this cost, and will attempt to do so for as long as we can, we will continue to review the situation. What none of us can afford to do though is to cut corners in sourcing the right materials.

“Given the government’s warning of possible further restrictions, this is one of many obstacles that we are facing together with our customers, but we are confident that together, we will navigate our way through.”

Anglo European Group CEO Paul Sullivan said his company, which supplies steel reinforcement to the UK window and door industry, had been putting plans in place to guarantee supply.

“To ensure that our customers do not experience potentially severe disruption to their production output caused by shortages of steel reinforcement, we have secured supplies at least until July 31, 2021, with negotiations at an advanced stage for the second half of the year.”

There was also a worry among observers that speculative purchasing was adding to the growing order volumes, and distributors and OEMs were “desperately trying to replenish their depleted inventories”, according to Meps.

This, in turn, could lead the market to overheat, especially as global demand isn’t as significant as predicted; for example, if car sales are not as buoyant as production would suggest.

This could leave companies with overpriced inventory if, or when, a collapse in steel selling figures occurs.