A summary of the market situation in June
May 2021
Kobout has asked its top 25 suppliers, most of them being in the Far East, for the reasons of the huge price increases and long delivery times.
Below you will find a summary of the current market situation:
- In the province of Hebei in China, having the main steel production in the country, there has been a strict lockdown since January 2021. This results in a growing lack of raw material.
- Second, the Chinese government discourages the production and export of raw materials with a high pollution rate. In order to manage this, the export discount of 13% valid before May 1st, has been cancelled since, and the production capacity of steel works has been limited by the government.
- Further on, tensions in the business relationship between Australia and China result in increasing raw material prices. Australia normally delivers 80% of its iron ore to China, however, this has gone completely to zero because of the business conflict.
- All these things cause the material prices to be at the highest level of the past 17 years and further increases are expected.
- Other Asian countries have difficulties as well. Because of the little rainfall in Taiwan the Taiwanese government instructed the agriculture October last year to stop growing rice, allowing the water to be used for the industrial sector. However, the situation has not improved: since March 2021 the restriction of the water consumption ahs also become valid for the industrial sector. Malaysia has been in a lockdown sinc March 2020. This brings lack of packing materials and manpower, which results in an increase of the costs of these products of over 50% compared to the same period last year.
- Now that vaccinating has got started worldwide, governments have started to invest money in their infrastructures again in order to restore their economies. That’s why the demand for steel from amongst others the United States has increased tremendously. Our manufacturers expect that this will result in further price increases.
- Another problem is the supply from Asia. Freight prices had slightly stabilized, but are increasing again due to the Suez Canal incident. The availability and the shipment remain a big issue and are pushing up the prices.
All these issues bring not only higher prices, but also pressure to the availability, resulting in long delivery times.