COVID-19 & Metal Industry: Challenges & Disruptions
The COVID-19 pandemic has had obvious effects on economies around the world. There wasn’t a single industry that wasn't affected last year between business shutdowns and societal lockdowns - some good, but more so bad - devastating even.
In 2019, before the COVID crisis, the metal industry was already facing difficulties with tariff struggles and early signs of a demand slowdown. An unexpected global pandemic did nothing to help. When you think about the day-to-day disruptions we faced in the early months of the COVID-19 crisis, it’s at times challenging to see beyond personal impacts, such as household goods shortages, mask mandates, schools closing, businesses shuttering, etc. However, everything in our daily lives is connected - from production to price and delivery of goods.
Let’s take the metal industry as our case in point. Consider how dependent our society is on metal- from aluminum cans to office supplies or appliances to buildings - metal is everywhere. When the pandemic struck, it disrupted just about every aspect of the metal industry, from manufacturing to distribution to finished products.
Furthermore, the pandemic has had non-tangible effects on the metal industry, none more so than the increased awareness of looming environmental risks. Countries worldwide, including our own, have doubled down on green commitments thanks to increased pressure from consumers, investors, and government agencies - all of which will affect metal production, supply, and demand.
Overall, the last year has had a significant impact on the metals market and raw metal prices. Although things are beginning to recover, the pandemic has left its mark - the result of which will determine what the industry looks like moving forward. Let’s take a look at the four most prominent metal industry news stories over the last year, beginning with raw metal pricing.
The Volatility of Metal Raw Material Prices
The World Health Organization (WHO) declared the coronavirus outbreak a global pandemic on March 11, 2020. Thanks to shuttered and reduced production, demand for most raw materials (in general) fell significantly in the early months of the pandemic, including metal demand. From March to May 2020, metal industry news indicated that the metal and mining industry’s average share price dropped 10 percent and individual companies lost 30 to 50 percent of their market value.
The pandemic-induced instability has had widespread implications for manufacturing organizations. From rising energy costs to unexpected fluctuations in raw metal prices, unforeseen obstacles have destabilized supply chains, making it difficult for manufacturers to maintain business as usual. With supplies of many raw materials becoming harder to secure, commodity price volatility skyrocketed and manufacturers had to absorb additional costs, find new ways to mitigate the expenses or pass price increases along to customers who are already reluctant to spend.
Global Economic & Geopolitical Shifts
The pandemic has been described as the most significant economic shock the world has experienced in decades, as it affected most countries worldwide with comparable intensity. As economies ground to a halt in the early months of 2020, so did the production and consumption of materials, including steel and other metals.
The good news is that we are starting to see a boost in China’s economic recovery progress, which is the biggest driver of metal demand in the world. So positive growth there bodes well for the industry overall.
In the long term, geopolitical factors will play a much bigger role in the steel industry’s future - namely decarbonization. Nations worldwide have been supporting reduced emissions efforts for years; however, the pandemic seems to have accelerated efforts. Countries, including the U.S., are proposing pandemic-related green recovery packages that emphasize decarbonization measures in economic recovery plans related to the COVID-19 crisis.
How will this look for the steel industry? A rise in efforts to provide steel solutions for zero-emission mobility, green buildings, solutions for climate change adaptation projects, and infrastructure modernization - all of which will increase metal demand.
Unfortunately, the metal industry has been slow to outgrow outdated production processes. However, coupled with pandemic-forced logistical changes, the decarbonization efforts will likely accelerate efforts to adopt new metal manufacturing technologies.
Top producing steel countries, including China, India, and Japan, have already set 20-30 year targets to reach net-zero emissions - and the U.S. is also on board. The reduction in emissions will only happen through changing production processes from methane-based to greener alternatives, like hydrogen. Technological advances for the metal industry will be costly and time-consuming; however, increased consumer demand for energy-efficient practices combined with increased governmental green policies will likely get us there sooner than later.
Decreased Demand for Steel & Metal
COVID-19 disrupted the steel industry on many different levels. From rising metal raw material prices to decreases in demand, metal manufacturers and suppliers felt the heat (no pun intended).
For example, global crude steel production decreased by 1.4% in the first 3 months of 2020 compared to the same period in 2019. Although steel was declared an essential industry, several factors impacted the demand for steel production and metal demand. From construction halts to high transportation costs due to air travel restrictions and partially or fully closed borders.
Although the economy is beginning to pick up in countries worldwide with vaccine availability and flattened infection curves, there is still a long road ahead. The good news is that infrastructure is a global priority, which will bode well for the metal industry overall.
Over the past year, “we’re all in this together” has become a mantra, and we’ve wholeheartedly embraced it at Texas Iron and Metal. From the beginning of the pandemic, we shifted operations to address the health and safety of our staff and valued customers, including easy and efficient load-and-go service. We continue to offer a vast selection of metal materials in new and environmentally friendly surplus steels, including saw and flame cutting, to make your job easier.
Check out our inventory online or give us a call any time with questions or material inquiries.