A Positive Start to 2022 - January Steel Director's Briefing
When I concluded the last director’s briefing of 2021, I mentioned that there were positive reports suggesting that the automotive sector’s semiconductor supply problems may be close to being resolved. As we head into February, we have definitely seen signs of an upturn in automotive activity with schedules increasing from March onwards. Which, again, points to the fact that things are moving in the right direction.
It's not clear how long it will take the supply chain to return to ‘normal’, with some reports suggesting that it could take until 2024, but signs of improvement are extremely welcome both for the manufacturing sector and the wider UK economy.
Of course, from a steel price point of view, the availability of semiconductors is only one side of the equation. The quantity of steel stock that exists within the automotive supply chain will have a significant impact and it is not easy to predict exactly what level this is at. However, as time passes, it seems reasonable to believe that we will have a much more complete picture of automotive demand by the end of February.
Steel prices have softened in the short term and general stock availability is healthy when compared to the shortages we were experiencing this time last year, which is welcome from a supply chain perspective.
However, we're getting very few forward offers from mills and some non-European producers have actually withdrawn offers. We should therefore expect some increases in the short-term as the mills assess automotive demand and look to factor in the rising cost of energy and raw materials. It is likely that the softening of prices that we’ve experienced in quarter one will be reversed in quarter two.
One area of uncertainty that does look to have eased is with regard to covid-19. We appear to be through the peak of the omicron variant and the easing of restrictions in the UK will be welcomed by the majority of businesses. The hope is that this gives businesses the confidence to invest and enables the UK to lead the post Omicron recovery.
Another positive is the opening of UK and USA steel tariff discussions. If an agreement can be reached, this could open up a number of new opportunities for UK manufacturers to exports to the USA.
As ever, I welcome your thoughts and wish you every success for 2022