The Hidden Costs of Covid to the Steel Industry
Over the nearly two years of the “Novel Coronavirus” pandemic, a lot has changed for industries across the board. You’re no doubt familiar with much of the impact covid-19 has had on your company or plant. There are, however, many compounding and aggravating factors to consider that may not be so well understood. Though it is a grim and sensitive subject, we want to help you to see the full impact of Covid on the steel industry as a whole. We hope that we can all learn lessons from these events and become a stronger industry as a whole.
The Clear Costs of Covid-19
One of the more obvious costs of Covid-19 has been the human cost. As of December 23rd, 2021, more than 290,000,000 people have been infected by some form of the coronavirus, and approximately 5,460,000 have died. Among survivors, an unknown but significant portion experience long term damage and symptoms long after the infection has cleared, leaving them less able to work. This human cost, though relatively small compared to the global population (about 3.5% of the population has been infected overall), has still caused serious disruptions to the labor force at all levels.
In attempts to mitigate the human cost, we’ve broadly taken up PPE, testing, and quarantine protocols that all cost companies both in materials and in lost productivity. At this time, there’s no way to accurately estimate the impact of these factors on the global economy or the steel industry itself, but it’s clear that at least tens of billions of dollars have been spent on these measures globally since the start of the pandemic. Inevitably this has affected all industries both directly and indirectly as passthrough costs.
Unstable Demand and Supply
In 2019 there was stable global demand growth of 1.3%. In 2020, global demand dropped 2.4% and in 2021 it has grown at least 4.1%. This alone has led to market volatility with steel production dropping by 0.9% in response to reduced demand in 2020 only to be forced to up production by more than 5% globally in 2021 to make up the difference.
This unforecasted increase in demand was severely aggravated by international freight supply shortfalls, delayed shipping, and massive increases to costs of shipping internationally and domestically. While some steel plants kept up normal production on a steady basis through the entire pandemic, with only brief or mild drops in productivity, many others had to close or reduce production for significant periods, making the increased demand significantly harder to account for. It is also unclear if this elevated demand is just pent up demand from 2020, or if it indicates a trend towards higher actual demand, making planning for the near future a challenge.
What Our Sales and Engineering Staff Have Seen On the Ground
We sent out a survey to some of our Latin American team members asking how they’ve seen their steel industry clients have been affected by and changed policies in response to Covid-19. While this isn’t a formal poll of the industry, our agents in the field each interact with several plants, and their qualitative experiences provide some insight into the measures plants have taken and effects had on production.
Are there new requirements to enter plants to meet with clients?
All of our agents reported that they’ve had to provide negative Covid tests at at least some of the plants they work with, and most also require full vaccination. For a period of time, when the virus was least under control, some plants even required isolation periods before visiting their facilities.
What problems has the new normal of Covid caused?
Our sales agents report that administrative staff is rarely on site now, and working remotely, which can cause slow downs and disconnects when decisions need to be made. The impact Covid has had on freight and logistics has also affected many plants, leading to a lower volume of inventory on hand and sales. Personnel shortages are affecting plants’ productivity as well.
Have you seen a reduction or increase in your clients’ production levels?
Most plants experienced a dip in production at some point during covid, either in response to reduced demand, reduced staffing, or other logistical issues, however, overall, production has remained relatively steady according to our sales agents and engineers.
Have you seen a reduction or increase in your clients’ staffing levels?
Most plants seem to have less staff on site, though others have remained pretty stable. What no agents reported was an increase in staffing levels, despite the increase in demand in 2021.
As an engineer/vendor, how have you been able to help clients with this situation?
Our engineers and vendors have stepped in to offer support with technical and administrative tasks depending on their expertise to support their clients. Not all plants are open to outside help, but those that have allowed our staff to help have benefited from assistance in making freight and general operations more efficient.
As a company, how could we be of help to your client with this current situation?
The most common area where client plants need assistance, according to our staff, is freight costs. They’ve increased so dramatically that no projections or preparations have been adequate. This is a pain point across the board, and has affected our own business in unprecedented ways. We continue to try to find ways to make freight work better for our clients.
FRC Global
We have been here for you throughout the pandemic offering competitive pricing on the supplies and solutions you need. We will continue to assist you in running your metal industry company for the long term. If your operation has suffered from the hidden costs of covid, reach out to us to find out how we can help.
