Steel mills see silver lining in semiconductor shortage

US auto producer Ford could lose 10-20% of its first-quarter production due to the global semiconductor shortage, according to chief financial officer John Lawler. 

That’s no cause for concern for steel, however, market sources say. 

Lawler notes that the semiconductor shortage is creating short-term volatility for the company’s 2021 guidance.

“The semiconductor situation is changing constantly, so it’s premature to try to size what availability will mean for our full-year performance,” he says. “Right now, estimates from suppliers could suggest losing 10-20% of our planned first-quarter production.”

Balancing the production losses against new initiatives in the EV and autonomous sectors remains a priority, he adds. 

“Our team is working with suppliers around the clock to optimise the constrained supply and minimize profit impact, while prioritising customer orders, new-vehicle launches and compliance with C02 emissions regulations.”

A source at one top-tier domestic steel producer says that Ford will compensate for any production shortfall in Q1 with increased output during the year. A similar catch-up campaign contributed to the surge in hot-rolled prices in the US in late 2020, Kallanish notes. 

“Inventories are 20% below one year ago, and the daily sales rate in January was 0.3% higher than January of last year – the first time the daily sales rate was higher than the year ago period since Covid began,” he says. “Low inventories that potentially impact sales in the next two months will only serve to prolong the demand.”