As a long-established Australian manufacturing company, Davell takes pride in making products that last. Our lockers and storage solutions are produced using quality steel.
We are thankful Australia has withstood the economic challenges of the past year.
In June the Australian Performance of Manufacturing Index increased by 1.4 points to 63.2 which was its highest monthly result since the Australian PMI commenced in 1992.
However, a steep rise in commodity prices has pushed up the cost of steel to a new 10-year high. This impacts Davell as steel is the primary material that we use to produce our products.
Global demands and shortages impact the price of steel
Global demand for iron ore has skyrocketed. The price per ton has now tipped over $290 AUD, which means it has doubled in a year. As Australia produces about 60 per cent of the world’s iron ore, this benefits our iron ore producers, however, domestically this contributes to higher prices for steel.
China’s demand for iron ore is known to have a significant influence on steel prices. Other related global factors that pressure steel prices include steel shortages in China and other big economies such as the United States.
The American steel industry, which reported a 215% increase in steel prices since March 2020, endured phases of steel mill shutdowns during the Covid-19 pandemic.
Steel shortages were intensified because the steel mill shutdowns collided with a surprise upswing in demand for steel-heavy goods like machinery, shipping containers, motor vehicles and home appliances as consumers stuck in lockdowns upgrade their household whitegoods.
The prognosis is that post-pandemic demand is unlikely to reduce steel prices.
Another key influence on steel prices is pandemic stimulus measures enacted by many countries throughout the world. They have countered the pandemic’s blow to their economies by launching major government infrastructure programs to stimulate local construction. These strategies rely on steel and other building materials, and the activity has increased global demand and pushed up market prices.
Demand and shortages in Australia
Australia has also experienced an increased demand for steel-hungry construction items and consumer goods.
In response to the global pandemic Australia has brought in changes that have far-reaching market repercussions, both positive and negative. As well as greenlighting large public works projects to ensure much-needed long-term activity, Australian governments have launched initiatives to assist homeowners and generate more local construction work.
These have contributed to an increased demand for steel. Steel is a key input for the building industry and component of road, bridge and rail infrastructure.
Australia has already started to experience shortages in steel, along with the timber and timber-engineered products that are associated with pandemic-stimulus measures such as the Home Builder Scheme. According to Master Builder chief executive Denita Wawn speaking on ABC Radio, these measures have put pressure on supply chains.
Pricing
Along with the increase in the costs of raw steel, costs of manufacturing goods are also growing.
The pandemic means we are in uncharted territory, but Davell remains committed to providing the best quality products, supporting local jobs and contributing to the wider Australian economy.
