One serious side effect of the COVID-19 pandemic has been the impact on U.S. manufacturing, both through shutdowns and through parts and material shortages caused by additional shutdowns and travel restrictions.
One area that continues to be severely impacted is the availability of steel. Experts are now reporting that the shortage in domestic steel manufacturing will continue through the first quarter of 2021, and perhaps even longer. Recent reports also indicate that a decline in steel imports means there is no offset for domestic shortages.
What is happening?
All steel intensive manufacturers in the U.S. are facing supply shortages, and those shortages have intensified since October 2020.
There are several reasons for the current steel shortage:
- Several steel production facilities were shut down during 2nd & 3rd quarters of 2020– about 19 million tons of capacity. Although facilities are being restarted, they are not expected to be able to meet demand until at least the end of the first quarter.
- Shutdowns were due to Covid-19 greatly cutting demand and creating a dearth of workers.
- Steel imports were cut greatly due to worldwide shutdowns increasing demand for U.S. manufactured product. 2020 steel production in the US was 18% lower than 2019. 2020 steel imports by the US fell by 22% compared to 2019.
In addition, inventory levels at service centers and warehouses have dropped to their lowest levels since 2004, average mill lead times are at 9.2 weeks compared to just 4 weeks in 2020, demand is exceeding forecasts, and extended lead-times make it impossible to replenish stock levels.
This is not a Draper or Draper supplier issue – it will impact all of our competitors and the construction industry as a whole. However, it will have an impact on us.
Draper only uses U.S. manufactured steel, and we use it most heavily in manufacturing gymnasium equipment. Draper has typically held large enough inventories to allow for any hiccups in the supply line and has worked with suppliers to keep blanket orders in place. We have leveraged our volumes and strong relationships with suppliers to get them to reserve inventories to draw on. Shortages have begun impacting both of those plans.
The steel shortage is affecting on-time shipments of some gym products. This is currently restricted to certain sizes of steel tubes. It especially impacts service orders such as replacement parts on existing backstops – often non-Draper backstops.
The situation is somewhat fluid, but we are continuing to work with our supply chain to minimize impact and to make shipments on-time whenever possible.
We are trying to provide as much advance notice as possible as we learn of potential material shortages but may have some situations where deliveries fail to arrive as expected from suppliers creating unforeseen manufacturing issues.
We are not currently feeling a heavy impact from the steel shortage in audiovisual manufacturing. However, Draper uses various types of steel to manufacture many of our projection screen cases, as well as mounts and structures, and other AV products. As with gym equipment, we are keeping a close eye on the situation. Orders are being manufactured and shipped on time.
Although we use less steel here than in other areas, particularly gym equipment, we are also monitoring our supply chain in this area as well. There is currently no impact to production or shipping of shades. However, as the shortage continues over the next several weeks, certain products and accessories could be affected.
We believe we have the right teams and processes in place to minimize the impact of the steel shortage in all areas, but the reality is the longer it continues, the bigger the issue will become.
We are watching the situation closely and will continue to be transparent about what is happening in the supply chain to prioritize what is needed to keep projects moving. Meanwhile, if you have any questions, you can reach out to your Draper representative. Click here for our contact page.