US stainless steel shortages expected to continue
The pandemic-induced imbalance between supply and demand, for stainless steel flat products, in the United States, will intensify over the next few months. It is unlikely that the severe shortages being witnessed, in this market sector, will be resolved, in the near term.
In fact, a further recovery in demand is expected in the second half of 2021, which will be driven by construction and, significantly, infrastructure investment. This will add even more pressure to the already struggling supply chains.
US stainless steel production fell by 17.3 percent, year-on-year, in 2020. Imports during the same period were also substantially lower. Distributors and service centres did not replenish their stocks during this time.
Consequently, when activity levels from the automotive and white goods sectors increased, distributors’ inventories, across the US, were rapidly depleted. This was most notable for commodity grade coils and sheets.
Output from the US stainless steel producers in the final quarter of 2020 almost recovered to the tonnages recorded for the same period in the previous year. However, the local steelmakers are still struggling to satisfy customer requirements.
Furthermore, the majority of buyers report significant delivery delays, for tonnages that they have already booked. Several comment that they have even had orders cancelled. The ongoing strike by ATI workers is further disrupting the supply of stainless steel into the market.
Despite the material constraints, profit margins across the whole supply chain have improved. Several respondents report that resale values, for the most sought-after coils and sheets, are at an all-time high.
One distributor commented, “you can only sell the material once”, and this is, inevitably, to the highest bidder. Replacement costs currently have little correlation with selling prices, with availability being the key consideration.
Consequently, support for the removal of the Section 232 measures is growing. This is most prevalent amongst manufacturers, which are struggling to obtain enough material to keep their production lines working.
However, the immediate removal of the tariffs would be highly unlikely to resolve the stainless steel market’s supply problems, in the short term. Furthermore, some fear that it would cause the market to become very quickly overstocked and trigger a crash in domestic pricing.