October 7, 2021 – Where is raw material demand heading in the face of rising energy prices and high freight costs? Posco President wants to decarbonize the steel industry collectively. And spot rates for ocean freight have fallen in the short term. An opportunity?

Freight costs, rising energy prices, raw material demand
Freight costs, rising energy prices, raw material demand

POSCO Chairman wants to decarbonize industry collectively

To address the need to bring the steel industry to the CO2 Net-Zero target, POSCO Chairman Choi Jeong-woo called for concentrated action by the entire industry at the Hydrogen Iron & Steel Making Forum 2021. In doing so, he stressed that no country or company could achieve this goal alone.

Collaboration instead of penalties

The approach of a community solution toward the Net Zero goal is thus clearly ahead of that of the European Union. The European approach of relying only on penalties and state aid, as in the case of thyssenkrupp, will not get anyone anywhere in the end. Especially when the EU Carbon Border Tax CBAM excludes dirty upstream products, but opens the door to non-CO2 neutrally produced raw materials – such as gray or blue hydrogen or non-green produced DRI/HBI.

Opportunity: Freight spot rates down

Currently, spot rates for freight have fallen by about 16% in some cases. In the long term, however, global freight costs are still expected to rise. Something you will have to adjust to in your procurement strategy. The current drop in spot rates could therefore prove to be a welcome opportunity to make a few targeted purchases. Seize opportunities when they arise.

Demand for metals remains high

Demand for metals, such as copper, nickel and aluminum, remains high. Even though some metals are down from their highs and China is squeezing demand through environmental measures and energy cuts, analysts expect Europe and the United States to eagerly pounce on some freed-up capacity. If only to fill backlogs that are currently holding back the manufacturing industry.

Slightly lower raw material costs vs. rising energy prices

China is just working through problems elsewhere, such as energy supply. Which has been a contributing factor to skyrocketing energy costs in some areas of the world. As soon as economies such as China, India, Brazil or the EU have put their energy supply back on a secure footing, prices for electricity, gas and oil are likely to fall again on the one hand, while demand for raw materials is likely to increase significantly on the other.

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