Steel Products
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/media/k2/items/src/bca8886b614e8e75620d997bd91c4dc6.jpg)
Backlogs Worry OEMs and Service Centers
Written by David Schollaert
February 22, 2022
Strong downstream demand for steel is expected through the first half of 2022, but unfilled orders and backlogs resulting from supply-chain troubles and labor shortages may wreak havoc in the second half, cautioned a panel of OEM and service center executives during the Tampa Steel Conferences last week.
“We’re certainly seeing strong demand for the first half of the year, but I’m concerned for the second half. … The main issue are the backlogs. It may be highlighted on manufacturing, but it’s everywhere,” said Bob Elsasser, vice president of procurement at Columbus, Neb.-based Behlen Manufacturing Co.
Elsasser made the remarks during a steel buyers’ panel. Other panelists were John Farley, senior vice president and chief operations officer at Tampa, Fla.-based service McNichols Co., and Mike Lerman, a president at South Bend, Ind.-based service center Steel Warehouse.
While rapidly falling steel prices grab headlines, OEMs and service centers might be even more concerned with supply-chain restrictions, rising labor costs and higher freight rates.
“Labor challenges are suppressing steel demand right now,” said Farley. “There could be a lot more demand for steel right now if we could work through backlogs.”
Finding and retaining labor is a challenge, said Lerman. “The commercial folks are forecasting a healthy increase in demand, and the operational side is trying to understand how they’ll get it done when you don’t have the space, parts, or people. And there’s excess inventory, you can’t convert it.
{loadposition reserved_message}
“The ripple effects from supply-chain and labor troubles will have greater effect on final steel demand than pricing will,” Lerman added. “There’s commercial demand. But operationally, how do we get there” to meet it?
The panelists agreed that construction demand is strong and consistent across the country. There is growth from data centers and warehousing to life sciences and healthcare. Large urban areas are seeing a boost in mulitresidential construction as well.
“Distribution and warehousing can’t be built fast enough, and that’s not going to stop anytime soon,” said Farley. “Fabricators and N-GOES expects a particularly strong year for steel demand.”
“There seems to be a theme that most industries have forecast an increase for this year, though it certainly doesn’t apply to all,” added Elsasser.
And falling prices are still a concern, especially with the resulting decline in inventory values.
“Declining steel prices and rising labor costs will present some of the greater challenges for the steel sector,” said Farley.
“It’s certainly a challenge to enforce deals when prices are decreasing, but it’s just a function of pricing dynamics” said Lerman. “It’s a challenge to ensure deals are being honored.”
“On the way up, buyers were happy to take material they had confirmed at lower levels but have selective amnesia when prices are moving in the opposite direction,” noted Elsasser. “The same pricing dynamics are still at play on a downtrend.”
By David Schollaert, David@SteelMarketUpdate.com
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2024/02/SMU_DS_headshot.png-150x150.jpg)
David Schollaert
Read more from David SchollaertLatest in Steel Products
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/images/Featured_News_Icons/coils2.png)
US steel imports slipped in August after rising in July
July represents the second-lowest monthly rate for steel imports so far this year.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/images/Featured_News_Icons/oil_drill.png)
Rig count update: US count eases, Canada’s flat
Oil and gas drilling activity in the US edged lower last week, while the Canadian rig count held steady at a six-month high.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/09/HRC-Futures.png)
HR futures: Trade case action official – It was already priced in?!
This month’s column on the markets could be a response to the question of last month, “Are the forward curve prices on Aug. 7 high enough to price in trade case risks?" The market’s answer has been a pretty resounding YES so far, I think.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2024/01/cropped-SMU_Mobile_final.png)
SMU survey: Lead times edge higher for sheet
Current steel mill lead time averages are a few days longer than levels seen one month prior, but remain near historical lows for both sheet and plate products.
![](https://www.steelmarketupdate.com/wp-content/uploads/sites/2/2023/08/Hybar-logo.jpg)
Steel Summit 2024: Hybar CEO accelerating growth plans for US steel market
Hybar CEO David Stickler and SMU Managing Editor Michael Cowden shared a candid conversation about Hybar's ambitious plans on Tuesday morning at the SMU Steel Summit, held in Atlanta this week.