Now, it is the steel shortage that threatens our industries. If we obviously think first of the decidedly battered automobile, it is not the only industrial sector to consume steel. Bicycles, household appliances, and even furniture, steel is omnipresent although in very disparate quantities.
Everywhere tensions are felt, prices soar with an increase of 25% and especially delivery times are counted in months. 3 to 4 months currently to be more precise which leads to shutdowns of production chains and also of entire companies.
Here are some excerpts from this article in Le Moniteur which reviews the situation in the steel sector.
“From almost immediate availability, we have moved to longer deadlines, up to 3 or 4 months on certain product families,” confirms Maxime Poux. “The fever on prices started with the sheets then the tubes on the side of the ore sector, then it reached the scrap metal sector …”
“The“ ore ”sector consists of the products of blast furnaces, ie steel sheets and tubes. These products that are used, galvanized, for modular construction, road signs, street furniture. While a ton of blast furnace steel was trading around € 250 before November, it is now around € 600 ”.
From 250 euros to 600 euros per tonne we are far from an increase of 25%, we are talking more about an increase of 240% !!! Hell, that’s a hell of a lot in such a short time.
What are the reasons for such a surge?
“With the health crisis, the sudden end of industrial activity in Europe in mid-March, and a collapse in final demand, steelmakers have decided to stop blast furnaces”, explains Laurent Clisson, director of the steel branch. of the Socoda group of traders. “About ten were arrested, which represented around 50% of European production! With the economic recovery in the spring, as long as demand remained low, stocks were sufficient, ”continues Laurent Clisson. “Then in the summer the situation was rebalanced. And from the start of the school year in September there was a gradual recovery in demand. But at the same time, the producers have chosen not to restart the blast furnaces. Surplus stocks ran out but demand continued to grow and then soared at the end of the year. This gap between the lack of supply and strong demand has created tensions on the prices that we negotiate, over-the-counter, month to month ”.
Tensions all the stronger as imports have dried up. “For two years, the European Union had implemented import quotas,” explains Laurent Clisson. “The exporting countries have exhausted their quotas which have not been renewed and they have turned to Asia in particular”.
The sudden rise in prices was therefore also accompanied by a scarcity of products or even a shortage, especially for galvanized products..
In a few weeks our factories will be forced to shut down for the most part due to a lack of sufficient electronic components, but also of steel.
Also in the coming weeks, other shortages will emerge and become problematic.
What will be the consequences of these multiple shortages?
A significant drop in overall productivity.
An increase in social costs linked to technical unemployment in addition to partial unemployment which is currently widely used.
A drop in production, and therefore in the activity and turnover, particularly of our industrial companies and the construction sector.
In fine, there will therefore be a visible impact on French economic growth that can be quantified with a wet finger and at the time of writing these lines at a point of GDP and growth if these shortages are not very durable.
There will also be an impact on public finances since there will be more social spending and less tax revenue since less activity.
This is not good news, and Bercy departments such as economists and other forecasters are not working enough on this issue of shortages, in particular industrial shortages.
What happens for steel actually happens for almost everything.
The health crisis and the shutdown of the economy in March 2020 made it necessary to quickly resize production levels, which were drastically reduced. The “recovery” therefore comes up against the ability to restart the whole of world industry, a globalized and interconnected industry.
The lack of visibility does not encourage either investing or restarting factories too quickly.
Logistics chains are very tense because they are disorganized and weakened by 12 months of pandemic and major disruptions in trade.
Barrier measures, social distancing and other measures to fight the pandemic are shattering the productivity levels achieved and it is not possible to do as much as before, everything is in slow motion.
In conclusion ?
The restart will be slower than one would expect from reading the enthusiastic forecasts of the mamamouchis in charge of the economy.
The rebound will be less strong than expected, the nation’s accounts even more degraded.
But it does not matter.
The stock markets are rising.
This is the famous rule of the more rotten the more it is good news because the central banks will still be forced to pour a lot of money into the economy, which will benefit the financial markets if not useful to the populations. .
It is already too late, but all is not lost. Prepare yourselves !