As many of you know, wire pricing and lead times have jumped significantly over the last year, 2021. On average, we saw price increases approaching 60% for some materials and lead times increasing to 75%.
The most significant cause for this problem, of course, was the Corona virus and the domino effects on the supply chain. The most significant effect being the lack of human resources throughout this supply chain. In what seemingly appears to be an automated world, never have the affects due to the lack of human resources, to accomplish their tasks, been so obvious. With government mandates for shutdowns, quarantines, hospitalizations, etc., human resources were not available to mine the ore, to process the steel, to draw the steel, to warehouse the steel and of course to physically transport between all the steps in the supply chain. Only recently have these human resources been back to work, allowing our industry to once again “fill the pipeline”. But our industry is a big pipe that is quite lengthy, so it has and will take a while to where the supply chain spigot will start flowing like it did prior to the virus.
The good news is that we expect these prices and lead times to stabilize and potentially start to decline beginning the 2nd quarter, 2022.
Forecasts from fastmarkets.com are predicting a down-slope in steel market pricing for long products, such as wire, in the Mar/Apr 2022 time-frame. Per Tim Nielsen (2/17/22), Sales Executive at Davis Wire, “recent data shows with almost certainty, that wire rod and zinc are at a peak and will soften by April/May, 2022”. Lead times due to ocean freight, transportation and logistics will also start to decline in 2022 and it is estimated that rates for ocean freight will be corrected and will drop by 30-40% in 2022 (shiphub.co). Other industry analysts support these same conclusions. Still, only time will tell whether these predictions become factual, and as you have all heard, our industry is a very volatile industry where anything can happen.