The world is still facing crippling material shortages, primarily as a result of the COVID-19 pandemic. Furthermore, due to the world’s recovery process, prices for materials like metal and nickel materials have skyrocketed due to the booming consumer demand!
The third catalyst in this unfortunate trifecta is supply shortages. Materials like zinc and copper that were under lockdown from major resource countries like Peru, which are responsible for supplying thermal heating equipment, together with tariff barriers, have left consumers with very few options at their disposal.
The United States increased anti-dumpies duties on a further 18 countries that supply sheets of aluminum. Similarly, Europe offset the same effect by imposing restrictions on flat-rolled aluminum. This saw the whole of the European market being under tight constraints for these materials.
Added pressure in the form of cost increases and restrictions on global logistics had added to the woes. The two main shipping routes, Asia to North America and Asia to Europe, have seen container shortages, shipping delays, and a sharp increase in freight costs in the last year.
These types of logistical delays and the increase in rates appear to at least be slowing down somewhat. This includes a 50% drop in the rate from boxes that were shipped from China to Europe than where it was two months prior. Even though the ease of costs is a welcome relief worldwide, it might only be towards the end of the year, when costs will be deemed as reasonable again by consumers.
In these sectors, raw material shortages go hand in hand with shortages in materials like resin, which are associated with the manufacturing of specific components, for instance, semiconductors.
It is very much a waiting game at this point, as consumers are waiting to see what will happen from a cost and material shortage perspective as we enter the second half of the year. At this point in time, consumers find it challenging to gauge how material shortages can be counterbalanced by a decrease in demand due to material shortages of other materials.
Thus far, the reduced aluminum and steel supply has not had much impact on the production programs of consumers. However, three primary car manufacturers, namely: Honda, Volkswagen, and Ford, have been placing their production lines in neutral, awaiting further news on the shortages of semiconductors.
Sheet makers will therefore be looking to restore the balance by serving the demands of commercial clients when the user demand returns to normal.
Only time will tell in the coming weeks and months if the stalling of production from car manufacturers can ease the burden on the aluminum and steel supply chains, respectively.
This is a very hard variable for consumers and distributors to base their forward buying and inventory planning on. However, when the car manufacturing market is experiencing issues, it plays an integral role in the price of metals.
Automotive production and manufacturers have the power to flatten the current peak into a more sustainable and gradual demand over a longer period in time for the remainder of 2021 and 2022. This will give consumers and manufacturers alike the opportunity to comply with a moderate type of demand without having to pay excessive prices and be concerned about the impact of the lead times.
This has not been possible for the first half of 2021. In fact, the semi-finished metal markets in North America and Europe have been facing higher prices and prolonged lead times from the mills, while stockouts have become all the more common.
One thing is certain; consumers will jump at the opportunity of cost-saving or supply pressure that stems from the travails of the car manufacturing sector.