The last several months have been characterised by a number of issues and bottlenecks affecting steel markets and adding to the price momentum of most commodities. According to analysts, two of the main issues noted in 2021 - high freight costs and chip shortages - are here to stay for the foreseeable future. 

FREIGHT RATES
Despite some recent signals of alleviation of bottlenecks in global freight, an Austria-based analyst believes those issues are here to stay.

“Along with Covid-19 came a shortage of vessels in international trade, and next came the shortage of containers,” says Markus Moll of consultancy SMR. Recently containers from Asia to the US reached a price of $22,200, to both the East and West Coast. With a loading limit of 22 tonnes of steel per 22-foot container.

“This would mean $1,000 and more per tonne of steel to the ports – and you have not even reached the customer yet,” he says.

Along with existing US safeguard duties of 25% under Section 232, transport costs are another massive hurdle for trade from Asia to North America. Still, in view of domestic steel prices, many US buyers find imports a feasible alternative.

According to Moll, freight rates have come down somewhat in recent days. However, “we had a dip in August already, and then prices peaked again. For the foreseeable future, I don’t think we will return to the old freight rates that were six times lower,” he says.

The bottleneck on the water affects other transportation, too. Moll cites a Chicago-based hauler who says that transports are increasingly being moved to aircraft. He now does 50% of his jobs by plane, against 25% in normal times. This, too, is driving up costs.

Aggravating the situation is the fact many containers are lying idle at ports after a one-way journey. In Europe, Rotterdam Port is full of empty containers from Asia that are not being used for return transports because Asia is normally the exporter, rather than the importer. “They are waiting for some freight to be filled – no ship would just take them back empty for free,” Moll concludes.