Steel Market Insight - December 2020

With many of our customers securing work for 2021 and looking for an insight into the market and pricing, below is a brief report to help outline some of the main factors influencing the steel market presently.

Steel Supply Demand

October sales reported within the industry suggest that consumption of Steel has grown to pre-pandemic levels. Since the start of the first lockdown, we ourselves have been seeing month on month increases. With disruptions at many UK ports, and the supply chain bouncing back from summer lockdowns, the market has seen a shortage on particular sizes. Additionally, amid concerns over Brexit and going into the realms of the unknown, many EU producers have shied away from supplying to the UK. Therefore, Q1 2021 is forecast as having a tightening on supplies and pushing up prices.

Raw Material Costs

Rising raw material costs and an increase in tightness of supply has led to multiple price rises. Iron Ore prices have risen to the highest level since March 2013 – an increase of more than 50% compared to the start of the year, and unlikely to see any short-term falls. Since the summer we have seen structural section price increases totalling £100 with a further £30 set to kick in from 1st of January.

Brexit

With trade talks with the EU set to go to the wire, it is important to plan for the future based on the few facts we know. At present many EU suppliers have stepped back from supplying the UK in Q1 until the new rules are better understood. Therefore, this will serve to tighten supply and increase costs, for those that continue to supply to the UK there will be additional expenses related to documentation and declarations. On top of this, there is a huge risk of disruption and delays through the ports.

Trade Tariffs and Quota’s

What we do know regarding Brexit, is that Steel will be subject to import quota’s and trade tariffs, effecting both supply from the EU and worldwide. With quota’s given on a country-by-country basis, administered quarterly, this may again lead to a tightening of supply of certain products, particularly until Steel Mills exporting into the EU get to grip with the new regulations and gain confidence.

Covid-19

The thing that has cast a shadow over the world for the entirety of 2020 looks set to continue into 2021, but hopefully with a reduced impact due to the vaccines that have started to roll out in the UK.

Worldwide Demand

With manufacturing and industry being encouraged to continue throughout lockdowns, the steel industry has remained busy. In fact, according to the World Steel Association, there was a 7% increase in crude steel production in October compared to 2019. The increase in production directly correlates to demand and therefore it is expected to reach a point where tightening of raw material supplies which inevitably will lead to price rises.

The Future

The positive impact of the Covid-19 vaccines taking affect will result in life returning to normal for many businesses. In turn, developments that were previously shelved will be resurrected. We have already seen in recent months a return in confidence, and the construction market will likely lead a bounce back for the UK economy. Businesses that have had a tough 2020, looking to play catch up and try to claw back some of the lost revenue, will also add to the demand for steel and increase competition for supplies.

Our Position

While there are undoubtedly a lot of unknowns for the future, ParkerSteel remains well positioned in the market. With secure supply chains in place domestically, within the EU and worldwide, we can adapt to all eventualities. We have kept stock levels high, supply chain permitting, and have increased planned deliveries throughout Q1, spread across suppliers to negate any issues and allow us to be prepared for further increases in Demand.

What it means for you

We are encouraging all our customers to place steel orders before Christmas for any stock required in the early parts of 2021. We have secured stock to prevent as much negative impact upon our customers as possible. However, to avoid any unexpected delays and price rises associated with potential tariff charges we urge you to plan accordingly. For any large project work planned for 2021, we understand the importance of both lead times being met and securing the best prices. We’re already working with large material requirements for 2021 with fabricators and contractors and would urge customers to get in contact and start discussions sooner rather than later to plan ahead. Please note these are the views and opinions of ParkerSteel Limited based on experience and market condition data supplied by third parties.