Posted on

How Manufacturers Are Navigating the Ongoing Steel Shortage

hollowed steel stacked

While social media memes abound regarding inflated lumber prices, the truth is even darker yet; many industries are facing a severe steel shortage that is directly affecting their production, their workers, and their bottom lines. Steel prices have risen an astonishing 160% since the summer of 2020, and it doesn’t look like it will be ending any time soon.

Before we discuss how manufacturers are navigating the ongoing US steel shortage, let’s take a look at how we got here.

COVID-19 Hit Manufacturing Industries Hard

The current steel shortage is directly related to the pandemic. It’s like an extended game of cause-and-effect that no one wanted to play.

COVID-19 was directly responsible for shutting down steel production facilities, and imports were equally impacted by shutdowns, trade wars, and tariffs. Workers found themselves laid off, unable to produce steel or manufacture the products that depended upon it.

Meanwhile, general manufacturing industries relying on steel faced their own shutdowns, meaning a decrease in the demand for steel. In short, low demand meant low steel production. It wouldn’t have mattered how much steel was in demand, though; COVID-19 also shut down the mining industry, limiting raw resources.

Many of the steel mills themselves were dealing with problems within their organizations, such as weather extremes and employee strikes. One mill in Canada even fell victim to a cyberattack. Steel mills in China continue to face difficulties, making imported steel just as scarce overseas as it is right here at home. One such complication is the enforcement of new emissions regulations governing steel provinces in mainland China. 

Closer to home, steel production is in overtime, but the mills can’t keep up with the new demand. Manufacturers may face difficulty in finding a steel mill that will even take their orders. 

At this point, manufacturers have depleted their steel inventories and either can’t find, or can’t afford, to replenish them. With such a severe supply chain disruption, the entire steel industry has had to cope with sluggish production, skyrocketing steel prices, and an uncertain future.

Steel isn’t the only material affected by supply chain disruption; there is a global metal shortage affecting aluminum, copper, tin, zinc, and other valuable metals. This is leading to complications in many unexpected areas, such as computers and roofing materials.

Experts widely predict that as 2021 moves on through the third and fourth quarters, steel production and pricing will begin to normalize. The process will most likely be slow, and fraught with difficulties along the way.

Tips for Manufacturers to Survive the Global Metal Shortage

Industries are being hit with steel shortages, but other metal resources are scarce as well, adding to the pain. While automotive manufacturers, for instance, never completely shut down due to the steel shortage itself, they are finding production is limited by a decrease in availability of the metals necessary to create semiconductors for computerized auto applications.

This isn’t necessarily entirely bad news. Limited auto production will lead to steel mills shifting their focus to meeting other industries’ demands.

How do manufacturers navigate the steel shortage as the world waits for normalization?

  1. Get Ahead of the Demand: Order more steel than you need, and before your supplies are low enough to cause disruption.
  2. Inform Customers: If the steel shortage will be impacting your customers, make sure they are aware that products will be facing extended manufacturing time.
  3. Split the Order: You may have one steel mill you rely on for your supplies, but don’t be afraid to shop around and find others, too. It may be advisable to split your requested inventory into smaller orders to make it easier for the mills to fill them.
  4. Consider Alternatives: While nothing replaces the strong reliability of steel, there are other metals and alloys you may be able to use in the short term.
  5. Partner Up with the Competition: You may be able to approach your competitors and offer exchanges of materials.
  6. Find Unused Metals: The automotive industry isn’t the only industry that is surviving the steel shortage while being impeded by the shortage of other metals. This means that some industries may have a stockpile of steel due to slowed production, or the mills they typically use may be available to produce steel for other industries.
  7. Do Some Overseas Research: China and the US aren’t the only steel manufacturing countries in the world. Japan, Germany, India, South Korea, Turkey, and Brazil are also in the steel production game. 

Remember that steel mills have only just reopened and while they had a very slow start, experts predict that throughout the third and fourth quarters of 2021, supply, demand, and pricing will begin to normalize.