As a consequence, customers are increasingly looking to source material from third country suppliers, despite the current EC import safeguard measures. However, if buyers are able to secure steel from an overseas mill, they will be met with transportation difficulties – a by-product of the coronavirus pandemic. This includes an exponential surge in shipping costs, due to a severe shortage of container availability in Asia.
Freight rates of around US$10,000 for a 40ft container are now commonplace, for deliveries between Asia and the EU. Several European market participants suggest that it would be cheaper to send an empty container to the Far East to collect the material. Such significant increases in transportation costs are difficult to absorb, especially at a time when stainless steel prices are also rising rapidly. Furthermore, the lack of container availability in Asia is leading to delays in the transit of the material.
Ports prioritise unloading
The Covid-19 outbreak has resulted in a displacement of containers around the globe. During the first wave of lockdowns in Europe, early last year, containers from Asia were still arriving at the docks. However, with the markets at numerous destinations in lockdown and manufacturing industries closed, many of the ports struggled to process the incoming deliveries. Some prioritisation of unloading, based on contents, took place. Those vessels arriving with huge shipments of PPE and medical equipment were often unloaded first.
Many ports worldwide continue to contend with a reduced workforce, as virus infection numbers and strict quarantine rules limit the number of employees on site. The situation at UK deep-sea ports has been intensified by a surge in pre-Brexit purchasing activity, combined with the initial post-Brexit EU/UK trading issues. This has resulted in prolonged delays in the shipment of empty containers back to Asia.
Many stainless steel buyers believe that the disruptions and high freight costs are likely to persist throughout the first half of 2021. A pause in production during the Chinese New Year holidays may encourage some shipping lines to return empty containers to Asia. However, the speed at which the current situation will return to normal will depend upon many factors. These include the successful rollout of vaccination programmes, the easing of travel restrictions, and a return to normal activities at destination ports.
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