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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.
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.
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.
Given the many challenges facing the industry today, it is likely the market will remain tight and continue experiencing steel shortages for the remainder of 2021.
If you are pricing work for later in the year, be very wary of fixed sum contracts based on today’s pricing — it is very possible that prices will continue rising.
It is essential that you factor these predicted price increases into your quotes. For more information about the steel industry, read more of our steel articles.
As Australia’s most comprehensive online steel and metal superstore, Edcon Steel is here to help. We cut and supply steel and metal– in a wide range of shapes, sizes and grades – for all your project needs.