Steel industry update

With steel prices expected to remain high for some time, Edcon Steel is committed to keeping you informed, and remaining as competitively priced as possible for all our customers.

Decreased supply and increased demand

Steel is in short supply across the world for the first time in years. China’s overall steel exports have reduced significantly in recent months and Australian production companies are struggling to fill the demand.

Local steel producers have not been able to build the necessary inventory because of the high demand and are seeing a lag in production.

Edcon Steel is seeing shortages in particular steel sizes that are lasting for weeks as mills desperately attempt to replenish steel supply.

As the problem shows no signs of abating, we strongly urge customers to plan and purchase as soon as possible to avoid delays or cost overruns.

Adding to the supply issues is the dramatic increase in local demand for steel over the past 18 months as governments attempt to stimulate economies with infrastructure projects and as lockdown measures increase the demand for household projects and construction.

China rebate withdrawal

These supply issues have been exacerbated by a recent change to VAT rebates. Effective May 1, 2021, China, the world’s biggest steel producer, removed its 13% VAT rebate on 146 steel products, including HRC, hot-rolled sheet, plate, rebar, wire rod, colour-coated steel and cold-rolled sheet with 0.5-3.00mm and below 0.5mm thickness. No changes to rebates have been made to cold-rolled coil and hot-dip galvanised steel.

More than two-thirds of total steel exports in 2019 were eligible for the rebate, so the flow-on effects of the rebate changes are starting to become evident.

It is almost guaranteed that the changes to the rebate will continue to put pressure on steel prices around the world and will alter trade channels.

Shipping delays

The issues plaguing the shipping industry since 2020 have shown no signs of easing, with cargo ships arriving later than ever in the second half of 2021.

Large-scale restocking, limited vessel capacity and a shortage of shipping containers have all contributed to delays right around the world.

Shipping executives and container line chiefs expect that the issues will continue for most of the year.