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Analysis of the world steel's market and price's scenario
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Published in May 26, 2021

Steel (but also others materials) is facing with a price surge from the beginning of 2021. What is going on steel’s market? And what about the plastic and wood ones? We can go on with other many raw materials. Those are the questions that the whole world is asking himself and for whose is difficult to find an answer.

Surely the current historical moment doesn’t help and the general mistrust that there was before the vaccine arrival, could let think about a recovery after the vaccine campaign; but something is still not working anymore. The raw material’s prices are increasing day by day and its availability is carefully dosed by distributors. But, why? We would like to have the crystal hope, but the causes of this problem are too many to find the correct answer.

What we would like to know, at least as much as possible, to undersrtand what are some of the causes that probably bring to an increasing of raw material’s price. It is known that the iron’s price is increasing constantly since the end of 2020. The floating of the price is something known in this sector, but what is happening now is an atypical event, never happened before. During the last year the prices of raw material increased of 170% and the forecasts for the next months don’t let think about a trend reversal.

The graph represents how the price of the raw material is going on a specific range of time, as you can see the price is increasing day by day and it seems that it is not going to decrease. (graph by London Metal Exchange https://www.lme.com/Metals/Ferrous/HRC-FOB-China#tabIndex=2)

As we said, the situation we are facing now is not really easy to understand. There are many factors and different reasons, that bring to this situation; we are going to summarize them, but they aren’t the only reasons.

First of all we want to point out some considerations: the European’s demand is not covered by the internal production and we must buy and import the material from others Countries; but there are some limits for import, decided by the European Commissison, and over those limits the customs clearance are of 25%. The other consideration is that the first producer of raw steel is China, followed by India at the second place (World Steel Association - https://www.worldsteel.org/steel-by-topic/statistics/steel-data-viewer_new/P1_crude_steel_total_pub/CHN/IND)

In China a very important topic nowadays, is the pollution. The Chinese Government is implementing some policies to reduce the pollution made by the major steel’s producers and it is pushing the Chinese companies to import the material from foreign Countries. These einviromental’s actions are bringing the price of the raw material to the highest levels of the modern history.

Furthermore, the Chinese Financial’s Minister announced that many different kind of siderurgical products from the 1st May 2021 don’t benefit of the exporting discount of 13%.

Meanwhile in India, the second steel’s producer in the World, is facing with the Indian variation of Covid-19, that now reached a very high percentage of affected people and the Country is difficulty managing the situation, this will create a slow down of both production and deliveries.

As seen, the situation is really complex and is not related only to the given causes. What is clear is that this situation is creating a worldwide disorder and big problems on all the sectors related to the steel world, such as buildings and automotive.

More over, is not only a problem of increasing price, but there is also a problem of avaiability of raw material and its long term for deliveries. Few months ago the material’s delivery was of few days, now we are speaking of a delivery time of few weeks.

Management is becoming critical: the price of raw material is changing hourly and the delivery date is uncertain, which cannot always meet what our customers demand. So, business relationships may be difficult at all levels.

The situation explained, high prices and non-availability of raw material, are creating problems for everyone in the industry. So, the questions we would like to ask are: what will be the developments of this situation? What consequences will it bring?

The answers to these questions will probably come with time; in the meantime, the industrial categories and the iron and steel world expect an intervention by governments, with the introduction of new policies to change and improve the current situation.

 

26 maggio 2021

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