As we write this, almost every industry in the country is feeling the effects of supply “constraints” – a tight squeeze on the availability of raw materials. Last year, the Covid pandemic had a significant negative impact on the economy, and the need for most basic production materials lagged. However, the demand for primary materials like lumber, steel, or electronic components did not go away altogether. Slowly but steadily, inventories were depleted, only to be replaced at much-reduced levels.
Now, with growing optimism and a hefty dose of stimulus money in buyers’ wallets, consumer spending is on the rise. If any part of President Biden’s proposed $2 Trillion Infrastructure Plan comes to fruition, the demand for steel will increase dramatically – reinforcing bar and wire rod for roads; heavy beams for bridges and overpasses. America is reopening to a more expensive economy than the one that existed pre-pandemic. Having said that, we offer the following observations about the steel industry and where we may be headed as we continue along in 2021.
Market Outlooks
A recent statistic noted that manufacturing in this country is operating at levels not seen in 25 years. There is a very strong pent-up demand for goods, and domestic manufacturers can’t fill their pipelines fast enough.
The housing market is on fire, and we are all amazed at the almost critical lumber shortages and the incredibly high prices for basic wood products. US housing starts surged by 19.4% in March, a sign real estate is booming on low-interest rates and a population eager to move. The National Association of Homebuilders estimates that the current higher pricing for lumber adds nearly $25,000 to the price tag of a typical new single-family home.
It will come as no surprise to those in our business that the availability of steel remains scarce, maybe even more scarce than it was just two weeks ago. Demand remains very strong and steel prices remain elevated. Mills are reporting that their 2nd quarter production is booked solid with only the possibility of some spot availability in July, while imported materials are limited.
"This is the wildest market I’ve seen in my entire career. Shortages are commonplace; pricing is all over the board, and shipping delays add to the aggravation. Truthfully, we can’t see the situation improving appreciably anytime in the immediate future.”
- Brian Newman, Boyd Metals’ VP & Director of Purchasing.
A shortage of truck drivers and flat-bed trucks is delaying steel shipments at critical points in the supply chain and further driving up shipping costs and lead times. In March of this year, there were 84 loads that needed to be shipped for every available truck, up from 22 loads for every truck in March 2020, according to DAT Freight & Analytic. The capacity squeeze has also driven up freight costs. Shipping rates without fuel surcharges were 33% higher in March than a year earlier.
The Bottom Line for Boyd Metals
Boyd Metals’ strong relationships with our outstanding suppliers have been extremely important during these difficult times. Our inventory position is robust and should meet your requirements into the foreseeable future. We have positioned ourselves to take care of our customers and help them grow their business even in times of shortage.
“The Purchasing Group is doing everything they can to quote all opportunities, keep inventory racks full, take care of current contracts, and plan for the future. The Sales Team continues to find ways to better serve our customers. It is so impressive during such a crazy market that the entire Boyd Metals group can come together, show up each day with a ‘we can do this’ attitude, and work smart to the benefit of our company and customers.”
- Brian Newman, Boyd Metals’ VP & Director of Purchasing.
2020 was a uniquely difficult year. As we approach mid-year 2021, the challenges may be different, but they certainly continue. If there's one thing can you can count on though, it's that here at Boyd Metals, we still have your back.
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