5/7/2021: Steel and copper wire makers are facing shortages of raw materials that have already resulted in higher prices and manufacturing slowdowns. Covid-19 shutdowns, growing demand, lack of investment, lack of discovery of new deposits, truck driver shortage, strikes, delays at U.S. ports of entry, and supply chain disruptions have all contributed to the problem. Shortages of basic materials such as steel, steel plate, copper and aluminum have affected many industries from computer chip makers to solar panels.
The shortages are affecting manufacturers worldwide who are struggling to find domestic and imported sources. In Europe, finished steel distributors are having difficulty finding steel supplies. In India, shortages have caused some steel metal wire makers to operate below capacity and may close down if lack of supplies persists. High-grade wire rods, the main raw material for wire production, is especially sought after.
Raw copper supplies have been in decline due to lower investment and mine development, notes Rob Haworth, a senior investment strategist at U.S. Bank Wealth Management. As a consequence, the higher bidder determines who gets the available materials. Such competition among manufacturers means higher prices are passed on to the consumer. Copper prices rose 100% from March 2020 to April 2021. To counter the shortage, large copper companies are increasing investment. For example, the Chilean government is spending $2.5 billion to expand existing mines; the Australian mining company BHP is allocating $900 million to find new copper and oil deposits.
On the bright side, higher material costs usually convert to higher profit margins. Shortages and price increases are expected to continue into 2022.