The next wave of steel prices and drastic energy price increases are heading for suppliers. Manufacturers who don’t cooperate with their partners now – despite cost jumps and an uncertain supply situation – may soon have none.
Liquidity reserves are shrinking by the day. Steel processing companies inevitably get caught up in the Corona and Ukraine storms. “The German success model of a global economy based on the division of labor is tottering. Suppliers and customers can only avoid the next wave that is building up together,” warns Christian Vietmeyer, CEO of the German Steel and Metal Processing Association (WSM). He speaks for around 5,000 companies with approximately 500,000 jobs.
Producer prices 50 to 80 percent above prior-year level
First in 2021, then at the beginning of 2022, and now again: For the third time in a row, starting material prices are shooting up unchecked: “In February, the producer prices of many steel and aluminum products were already 50 percent above the already very high level of the previous year, and for alloyed material we are seeing increases of 80 percent. And this situation is just getting worse.”
This is hitting steel and aluminum processors with full force: Suppliers have material cost shares of 40 to 60 percent. Supply chain needs fairness, a sense of proportion and responsibility The overall supply situation is increasingly threatening. Raw materials, components and energy are lacking or unaffordable, and the dreaded natural gas shortage could chill the entire steel processing industry. Almost the entire industrial value chain is affected. And the enormous price jumps cannot always be explained by the crises and conflicts. Often there is no connection at all between price increases and the Ukraine war as a reason for this.
In this gigantic storm, everyone has to be in the same boat – there is no room for competitors who use the crisis and conflict scenario to push through their own price advantages. “There must be no windfall profits,” Vietmeyer emphasizes. “In the supply chain, which is strained to the last link, fairness, a sense of proportion and a sense of responsibility are required of all parties involved more than ever before.” The “flagship industry” is lurching and needs combined forces to stay on course.