The demand for raw materials, in particular that of steel, has been growing exponentially since the beginning of 2021, breaking the market balance and causing a surge in prices.
The scarce availability of materials and the continuous delays in deliveries have had repercussions on the production capacity of many companies, which, having an order portfolio at all-times highs, have experienced difficult time.
In the past months, the Italian and European steel mills have cut ordinary purchase volumes and considerably increasing the lead time for suppling goods (from 2 to 4/5 months). The need to keep guaranteeing production continuity to our customers, has led us to place orders without knowing the price of the materials. The cost was in fact communicated later, close to the delivery of the goods, thus preventing us from calculating the due margins on the selling prices.
The prices of metal scrap and carbon rod (which grew by 30% at the beginning of the year compared to 2020) were recording stable in the last quarter. A few days ago, however, the price of scrap suddenly started to rise again, reaching € 412 per ton, the highest record in the last 5 years. Consequences have been disastrous: the price of wire rod has increased by 42% in the last 5 months and this upward trend seems destined not to stop if we consider the real shortage of material on the market. No one is able to predict the future scenario; we can only say that this situation is bringing commodities companies into a climate of great uncertainty.
The same problem is occurring in the stainless steel market, where the continuous pressure from demand has caused an average increase in the prices of long products of over 30% in the last 5 months, while the price of AISI 304 scrap has flown to € 1,500 per ton.