The U.S. stainless steel sheet supply and demand imbalance caused by the pandemic will intensify in the coming months.The severe shortages witnessed in this market sector are unlikely to be resolved anytime soon.
In fact, demand is expected to recover further in the second half of 2021, driven by construction investment as well as significant infrastructure investment.This will add even more pressure to an already struggling supply chain.
U.S. stainless steel production in 2020 fell 17.3% year-on-year.Imports also fell sharply over the same period.Distributors and service centers did not replenish inventories during this period.
As a result, when activity levels in the automotive and white goods industries increased, distributors across the U.S. quickly depleted inventories.This is most notable for commercial grade coils and sheets.
Production in the final quarter of 2020 by U.S. stainless producers almost recovered to the tonnage recorded in the same period last year.However, local steelmakers are still struggling to meet customer demands.
In addition, most buyers reported significant delivery delays for the tonnage they had already booked.Some reviews said they even canceled the order.The ongoing strike by ATI workers has further disrupted supplies in the stainless steel market.
Despite material constraints, margins have improved across the supply chain.Some respondents reported that the resale value of the most sought-after coils and sheets is at an all-time high.
One distributor commented that “you can only sell material once” which inevitably gives the highest bidder.Replacement cost currently has little correlation with selling price, with availability being a key consideration.
As a result, support for removing Section 232 measures is growing.This is most prevalent among manufacturers who are struggling to get enough material to keep their production lines running.
However, the immediate removal of tariffs is unlikely to solve supply problems in the stainless steel market in the short term.In addition, some fear that this could cause the market to quickly become overstocked and trigger a collapse in domestic prices.Source: MEPS