Back in May, we shared information about the material shortages affecting many of us worldwide. The information we’re sharing here has just been released.
Please take a few minutes to read this important update about the unprecedented issues many of us are facing regarding material shortages and delays; what’s causing them and how long they are expected to continue.
If we can be further assistance with any specific shortage issues your company may be facing, please contact us.
A Letter from a Supplier:
Dear Valued Partner,
Below is a detailed market update. Issues and conditions have worsened as the COVID-related challenges continue to disrupt the supply chain. We have increased our production and shipments steadily over the year. We greatly appreciate the continued patience and support as we work to keep up with this unexpected demand.
Current pricing challenges:
- Surcharges have risen since Aug 2020 due to nickel going from $6.50/lb. to $8.81/lb.
- Chrome and Moly have also been on the rise.
- Below are some examples:
- 302HQ +.59
- 304 +.50
- 314 +.92
- 316 +1.04
- 3519 +1.54
- We anticipate S/C increasing the next couple of months because current ones are based on nickel at $8.30/lb. whereas it is now trading at $8.81.
- Chrome S/C gets set on a quarterly basis and the 4Q estimate is an additional increase of .04/lb. to .05/lb. This will be locked in for all
- Base price increases from domestic mills- we have had five this year that total a minimum of $.24/lb. Some grades such as 310 & 314 have seen even higher base increases.
- Once the domestic mills became fully booked, they removed all price incentives TSM (Tri Star Metals) and others had and will only accept orders at full book.
- The domestic mills have put all customers on allotment. We are limited to the volumes purchased in 2020 plus 10%. That is not nearly enough to cover domestic market needs for SS
- Imported Rod Pricing:
- Container cost have increased from $4,000 to over $21,000. That represents over .45/lb. in additional costs.
- Chinese Govt added a 14% export tariff to our cost. This is an effort to keep material in China and cut in addition to 232 & 301 previously put in place.
- European mills are very expensive and lead times are out to March Ex-Mill.
- Indian Rod is still under dumping duties of over 45% making them uncompetitive.
- TSM buys from Taiwan and Korea, but their pricing is the same or higher than China.
- Imported rod is now more expensive than domestic but we are dependent on it since domestic capacity cannot cover the needs of the USA
- Increased Labor, energy, and trucking costs as well as cost for supplies. Wire carriers now 3X higher due to steel prices and demand.
Our synopsis is at the current demand level coupled with the statements above pricing will stay the same or go higher through 1Q. The only relief would be if S/C and/or shipping cost come down which seem unlikely as of today.
Lead Time Challenges:
- Demand from all customers has led to TSM now having 4X the normal workload.
- TSM top 100 customers on average are up 32% over last
- For the month of July TSM shipped 7% more than last July.
- All our mills both domestic and import are overbooked and shipping late:
- Example 270,000 lbs. of 314 from NAS was order as an end February shipment. We did not start getting material until end of June. They short shipped us 54,000 lbs.
- Container Shortage, port & rail congestion have caused imported rod to go from 4 weeks to 10 weeks or more.
- Because of un-forecasted growth from customers and above delays, rod shortage is a major issue.
- TSM is spending extra money to ship to Washington State and certain East Coast Ports in efforts to avoid port and rail fees.
- Please watch shipping cost on imported goods. All import mills are putting in various measures to pass along increased freight rates to customers buying finished bar & wire.
- Our lead times are not improving, and we do not see this changing through the end of this year.
- Rod delays due to container shortage, shipping congestion and mill lateness is not improving. We believe this will continue to be an issue through at least 1Q 2022.
- Please work with your TSM Sales Professional to get updated shipping dates. Our team is dedicated to getting material to our customers as quickly as possible.
President & CEO | Tri Star Metals, LLC