Solar industry supply chains are being pinched on all sides. The AD/CVD trade case has three-quarters of the industry saying projects are delayed are canceled. In addition, the war in Ukraine and the resulting sanctions have had serious impacts on commodity markets. Steel in particular is seeing a lot of volatility.
Eric Goodwin, director of business development for OMCO Solar, one of the top steel racking providers to the solar industry, sent out an update to their customers this week, putting that impact in perspective and what it might mean for projects and pricing going forward:
A few facts to note:
• Russia and Ukraine combined are the 3rd largest steel producers in the world—ahead of both the US and Japan, and just behind, India.
• Ukraine is the world’s leading steel exporter at 80% of its production, not far behind is Russia at 53%. Steel shipments flow through the Black Sea, which is currently mostly shut down.
• Pig iron is used in mini-mill Electric Arc Furnaces (EAFs). Russia ranks 1st in the world for pig iron exports with 32% of the world market share.
• While the disruptions in the steel commodity and pig iron markets are felt directly in the European and North African regions, the ripple effect in the US is quite rapid.
• With the US only producing enough steel to cover about 70% of normal demand, our country relies on imports from the rest of the world to make up the difference.
• To make matters worse, the US steel industry has reduced capacity in the last two years, leading to supply pressures and increased prices. Most recently, and just before the invasion, Cleveland-Cliffs (North America’s largest flat-rolled steel producer) announced another blast furnace indefinitely idled.
• Russia’s steel giant, Severstal, has operations in the US, which are now commercially disrupted due to imposed sanctions.
Steel prices in the U.S. peaked in November of last year at record levels. They drifted down through February, and we are all hoping for a new and more reasonable normal to evolve and availability to normalize as we work through 2022. This is a positive trend which has been reflected in price reductions through Q1.
However, now things are reversing as steel prices rapidly accelerate. In the last several weeks, galvanized steel jumped approximately 25% and hot rolled steel has increased about 44%. North Carolina’s Nucor, the largest US steel producer and mini-mill steel maker, has announced that prices are rising each week, now totaling 29% in increases. Future markets for September delivery have escalated 70% in three weeks.
Some experts are anticipating a new rapid run up cycle that will eclipse the last in both rate of acceleration and peak levels.
That is a lot to process and navigate around. Despite all of that, Goodwin does note they are maintaining U.S. production lead times in as little as 6 to 8 weeks.
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