How to Avoid a Shock in the Supply Chain
U.S. steel makers are struggling to keep up with demand for their products amid a slowing global economy, according to a new report by metals experts.
The report, which surveyed more than 1,500 suppliers in the United States and Canada, found the industry is “shocked” by the downturn in demand for its products, including steel, as well as by an anticipated $1 trillion global demand for metals, the report said.
The industry’s reliance on imported raw materials has been key to its bottom line, the survey found.
U.S.-based steel makers like Steel Dynamics Inc. have struggled to meet demand for steel products like stainless steel and forged-iron, as demand for the raw materials declines, said Dan Schoenmakers, the executive vice president of supply chain management at J.D. Power & Stratton &% and a consultant.
“This is a major market for steel, and the bottom line is pretty critical,” Schoenmarks said.
“It’s a pretty good bet that we will have an increased production rate for steel this year, if we keep things the way they are.”
The survey found that many suppliers are in a race to reduce costs and maintain quality, as supply chains struggle to cope with the pace of change in the economy and a tightening labor market.
The survey showed that while most of the companies surveyed said they are trying to meet supply-chain challenges, most also are concerned about the environment and have begun implementing environmental initiatives.
In some cases, companies are turning to new technologies to address environmental issues, including new forms of recycling and a new method of testing steel, said Robert Hirsch, senior vice president and chief operating officer at Hirsch Industries Inc.
A large percentage of suppliers said they have started adopting new production methods for their production.
“It’s definitely a positive trend,” Hirsch said.
“We have found that if you are investing in a manufacturing process, it pays off.”
The metals industry has been grappling with a slowdown in demand in recent years as China’s economic growth slows and the U.K. and other countries tighten restrictions on imports.
But U.A.E. steel imports have continued to grow despite those pressures, fueled by rising demand from China.
The U.C.N. agency expects the global steel market to grow by about 2% in 2017, from $4.2 trillion in 2016 to $5.7 trillion in 2021.
But even as demand slows, the United Kingdom has said it could export more than $3 trillion worth of steel in 2021 and the European Union plans to export up to $4 billion in 2018.
The metals sector is expected to be among the largest sources of jobs in the U, with the average annual growth rate at more than 12% between 2015 and 2021, according the U and U.N.’s report.
The supply chain is one of the biggest drivers of U.E.-made steel, accounting for roughly 10% of U,S.
output and 30% of the U.’s output, according U.B.C.’s Schoenmaker.
U.G.S.’s global steel output is expected grow to about 15% in 2021 from about 8% now, while U.U.’s steel output could increase to more than 15% by 2020 from about 6% now.
The metal industry has struggled to respond to a slowing economy, including the impact of a slowing labor market, as manufacturing jobs have dried up.
It is also grappling with the prospect of a global downturn in the metals market, and a glut of supply.
The International Monetary Fund expects global demand to continue to decline in 2021, the most pessimistic forecast since its 2016 assessment of the global economy.
The global metal market is expected decline by about 1.5% this year and by about 0.6% in 2020, the IMF said.UBS analysts said they expect a sharp slowdown in the world’s demand for metal products as metals demand declines globally.
“Metal prices will have to come down by about 5% next year or 6% in the year ahead, the bank said.
While demand from the U to the U.-S.
and China remains strong, demand from other countries will likely be weaker than what we have seen so far this year,” the analysts wrote.