Global Freight Shortage Affects Steel Prices
The COVID-19 pandemic has had massive impacts on industry, economy and supply chains as well as on leadindividual people. There has recently been unprecedented demand for metal worldwide and this has been difficult to fulfill, not only due to a shortage of material but also to a shortage of freight.
Lockdown restrictions have severely affected Asian metal producers in China, Korea and Taiwan, among other countries. These producers have experienced a huge growth in demand for products to be shipped globally; some of this demand can be attributed to shortages from lost production in the early days of COVID-19. Brexit is further compounding increased demand.
With a return to work in China, domestic demand has risen sharply but there has not been nearly enough capacity to keep up. This has had a knock-on affect around the world. When the pandemic began, many shipments were held up, causing delays around the world. This resulted in containers not being in the correct location to meet increased capacity.
Shipping giant Hapag-Lloyd described the worldwide container shortage as a 'black swan' event. The company noted the 'strongest increase in 40ft [container] demand, following one of the strongest decreases in demand ever' within a space of just six months. The shortage has hit Intra-Asia trades hard, with carriers prioritising trans-Pacific profits. The Intra-Asia tradelane is the biggest in the world, carrying around 30m teu every year between more than 100 port pairs.
Freight costs have previously been kept low, with competition between regional players and less carrier consolidation as compared to deep-sea trades. These low-priced shipping routes are now seeing massive increases in freight costs, along with carrier surcharges.
The combination of all of these factors is having an effect on steel prices. Ironically, lower-priced products like Aluzinc and galvanised steel will see the biggest price rises, due to them suffering the largest percentage increase in terms of overall total cost.
BS Stainless will continue to provide our customers with the most competitively-priced products and materials. For updates on this volatile situation, please subscribe to our regular newsletter and follow us on social media ( facebook, twitter and linkedin ).