What actions we take for your business
A message from Craig Powell, Steel Business Unit Head- Americas on stabilizing supply of finished goods under COVID-19 logistical challenges.
After a substantial and sudden decline during the onset of the COVID-19 pandemic, global refractory demand escalated without proper predictability throughout the 2H of 2020 and into Q1/2021. Steel production in the America’s declined by 11,5 million tons Q1 to Q2/2020 and recovered 9,5 million tons between Q3 and Q4/2020.
Most of our customers and suppliers have experienced similar circumstances trying to produce demand that recovered faster than predicted, with inventory levels lower than necessary, while trying to restore safety stocks, and overcome increasing lead times. The phenomena that many of you have experienced, we are also experiencing.
Next Steps
RHI Magnesita personnel will proactively visit your plant over the next days and weeks to maintain open dialogue until we reach stabilization. Thank you for your continued patience and I assure you we are taking extraordinary actions at significant expense to restore the supply chain, amidst external factors, which are challenging.
Updates by region
Please click on the corresponding icon to obtain more information about the counter measures and updates for the relevant region:
Global Freight
Status:
Global sea freight is difficult on all continents.
- Scarce shipping space availability leading to an increase in transit times (+ 4 weeks).
- Shipping delays for products produced mainly from Europe and China.
- Carriers send their containers to the countries where they can make the most profit.
- The current difficulties for containers have contributed to a dramatic increase in ocean rates.
- Container availability has also been impacted by COVID-19 related PPE, and reduction in global air freight capacity.
- Only 50% of the vessels are on time (six months ago: 85%).
- Empty containers are not available where they are needed, we currently wait several weeks for a shipping slot and our deliveries, especially from Europe (North Ports and Turkey), but also from China, can be severely delayed.
Ongoing actions:
- RHIM is paying a premium fee, however this does not provide us space on the next departure, but only on the next available vessel.
- Escalation meetings with carriers, MSC and Hapag-Lloyd to prioritize our shipments, to get exceptions from the booking stop.
- Continue to shift volumes to break/bulk vessel to release containers.
- Regarding congested ports and delays, we are making efforts to influence our forwarders to use direct services instead of shipping via transshipment ports.
Status:
Global sea freight is difficult on all continents.
- Scarce shipping space availability leading to an increase in transit times (+ 4 weeks).
- Shipping delays for products produced mainly from Europe and China.
- Carriers send their containers to the countries where they can make the most profit.
- The current difficulties for containers have contributed to a dramatic increase in ocean rates.
- Container availability has also been impacted by COVID-19 related PPE, and reduction in global air freight capacity.
- Only 50% of the vessels are on time (six months ago: 85%).
- Empty containers are not available where they are needed, we currently wait several weeks for a shipping slot and our deliveries, especially from Europe (North Ports and Turkey), but also from China, can be severely delayed.
Ongoing actions:
- RHIM is paying a premium fee, however this does not provide us space on the next departure, but only on the next available vessel.
- Escalation meetings with carriers, MSC and Hapag-Lloyd to prioritize our shipments, to get exceptions from the booking stop.
- Continue to shift volumes to break/bulk vessel to release containers.
- Regarding congested ports and delays, we are making efforts to influence our forwarders to use direct services instead of shipping via transshipment ports.
Contagem (Brazil)
Status:
Reduce backlog, stabilize raw material levels, and prioritize critical orders.
- There was a -28% decline in steel production from Q1/2020 to Q2 in Brazil at the onset of the COVID-19 pandemic, requiring us to adapt our production to the decline in volumes.
- The inconceivable occurred by Q4, the Brazilian market not only recovered the pre-pandemic steel pour, but in fact surpassed it, coinciding with the unexpected overall market recoveries in Mexico, Argentina, USA, and Canada.
- Safety stock levels of raw materials were not sufficient to account for the sudden increase in demand.
- Certain raw materials, which were sourced from China, experienced several shipment delays and an increase in production lead times.
Ongoing actions:
As we started to see the impact of these supply constraints, we implemented the following actions:
- Evaluation of the finish goods inventory by customer to define production priorities.
- Qualification of suppliers outside China to re-establish alternative options for raw materials.
- Air freight of raw materials > approximately 800 tons of FM and 300 tons of BFA.
- Restart of our fused magnesite plant in Brazil, to recover our FM inventory level.
- Air Freight of finished goods to North America customers.
- To free capacity, in select cases, temporary transfer of magnesia carbon production from Contagem to qualified alternative locations.
- Reassignment of magnesia carbon inventory to partially offset delays.
- €43 mio investment in the raw material rotary kiln project in Brumado (Brazil).
- Modernizing the plant by raising the level of automation to increase plant productivity.
Status:
Reduce backlog, stabilize raw material levels, and prioritize critical orders.
- There was a -28% decline in steel production from Q1/2020 to Q2 in Brazil at the onset of the COVID-19 pandemic, requiring us to adapt our production to the decline in volumes.
- The inconceivable occurred by Q4, the Brazilian market not only recovered the pre-pandemic steel pour, but in fact surpassed it, coinciding with the unexpected overall market recoveries in Mexico, Argentina, USA, and Canada.
- Safety stock levels of raw materials were not sufficient to account for the sudden increase in demand.
- Certain raw materials, which were sourced from China, experienced several shipment delays and an increase in production lead times.
Ongoing actions:
As we started to see the impact of these supply constraints, we implemented the following actions:
- Evaluation of the finish goods inventory by customer to define production priorities.
- Qualification of suppliers outside China to re-establish alternative options for raw materials.
- Air freight of raw materials > approximately 800 tons of FM and 300 tons of BFA.
- Restart of our fused magnesite plant in Brazil, to recover our FM inventory level.
- Air Freight of finished goods to North America customers.
- To free capacity, in select cases, temporary transfer of magnesia carbon production from Contagem to qualified alternative locations.
- Reassignment of magnesia carbon inventory to partially offset delays.
- €43 mio investment in the raw material rotary kiln project in Brumado (Brazil).
- Modernizing the plant by raising the level of automation to increase plant productivity.
York (USA)
Status:
York has 2 rotary kilns used for calcining the raw stone into dolomite brick grain grades.
- In January, our main rotary kiln began developing hot spots that required a process change to continue operation, resulting in lower production of our DBD.
- In early February, based on sustained dolomite product demands, we took the decision to replace the affected refractory in the kiln, to provide a quicker recovery of DBD supply.
- Two weeks ago, our secondary rotary kiln was affected by an external power outage, further depleting our safety stock of DBD.
- Our DBD supply level severely reduced our production capability of Resin bonded dolomite bricks (DGU) and Dolomite mixes (DU), subsequently reducing our finished goods safety stocks.
Ongoing actions:
We project our internal DBD supply to stabilize in the next 1-2 weeks, leading to dolomite mixes production recovering in late-February, followed by resin-bonded dolomite brick production stabilizing mid-March.
In the middle of the rotary kiln repairs, our dead burned magnesite (DBM) supply reached a point where we were in a shortage situation, due largely to consumption outpacing supply, as we responded to quickly increasing demands of magnesia carbon brick and magnesia mixes in 4Q2020.
- Our DBM supply concerns were further exacerbated by ongoing supplier and delivery delays.
- We were able to augment a portion of DBM supply by sourcing from the domestic market.
- We project our DBM supply to recover mid-March, to stabilize our magnesia mixes production in late-March. We are increasing DBM inventory level targets to build stronger stocks of DBM.
Status:
York has 2 rotary kilns used for calcining the raw stone into dolomite brick grain grades.
- In January, our main rotary kiln began developing hot spots that required a process change to continue operation, resulting in lower production of our DBD.
- In early February, based on sustained dolomite product demands, we took the decision to replace the affected refractory in the kiln, to provide a quicker recovery of DBD supply.
- Two weeks ago, our secondary rotary kiln was affected by an external power outage, further depleting our safety stock of DBD.
- Our DBD supply level severely reduced our production capability of Resin bonded dolomite bricks (DGU) and Dolomite mixes (DU), subsequently reducing our finished goods safety stocks.
Ongoing actions:
We project our internal DBD supply to stabilize in the next 1-2 weeks, leading to dolomite mixes production recovering in late-February, followed by resin-bonded dolomite brick production stabilizing mid-March.
In the middle of the rotary kiln repairs, our dead burned magnesite (DBM) supply reached a point where we were in a shortage situation, due largely to consumption outpacing supply, as we responded to quickly increasing demands of magnesia carbon brick and magnesia mixes in 4Q2020.
- Our DBM supply concerns were further exacerbated by ongoing supplier and delivery delays.
- We were able to augment a portion of DBM supply by sourcing from the domestic market.
- We project our DBM supply to recover mid-March, to stabilize our magnesia mixes production in late-March. We are increasing DBM inventory level targets to build stronger stocks of DBM.
Ramos (Mexico)
Status:
Recovery of manpower from the dramatic technical stop within 2Q/2020, and the depletion of the raw material safety stock has put stress on our magnesia carbon and alumina magnesia carbon production lead times. We expect full stability within Q2.
Ongoing actions:
- Raw Materials: COVID-19 crisis affected delivery time from our own suppliers increasing from regular 8 weeks until 20 or more weeks. We are actively moving to restore our raw material safety stocks according to the adjusted demand, plus an additional 10-15%.
- Recruitment of new talent to cover manpower, the number of positive cases within the plant were unexpected, and we suffered the availability of people, despite efforts to close gaps via outsourcing. The resources have now been restored on site.
- Comprehensive maintenance plan to keep our equipment at optimal condition and with these actions we assure one of the highest delivery performances of the group.
Status:
Recovery of manpower from the dramatic technical stop within 2Q/2020, and the depletion of the raw material safety stock has put stress on our magnesia carbon and alumina magnesia carbon production lead times. We expect full stability within Q2.
Ongoing actions:
- Raw Materials: COVID-19 crisis affected delivery time from our own suppliers increasing from regular 8 weeks until 20 or more weeks. We are actively moving to restore our raw material safety stocks according to the adjusted demand, plus an additional 10-15%.
- Recruitment of new talent to cover manpower, the number of positive cases within the plant were unexpected, and we suffered the availability of people, despite efforts to close gaps via outsourcing. The resources have now been restored on site.
- Comprehensive maintenance plan to keep our equipment at optimal condition and with these actions we assure one of the highest delivery performances of the group.
Europe & Turkey
Status:
Demand increased greater than forecast level leading to extensive lead time increase, mainly for (monolithic mixes) and (mag-chrome) products.
- The production gap has not been fully covered by the safety stock levels.
- Replenishment of safety stock in alignment with the changed demand is ongoing.
- Regarding MUH (furnace mixes) for NAM, efforts to alleviate the European supply stress with Dola products from York Plant proved unsuccessful in the short-term, as we experienced the production disruption in York, along with necessity to increase raw material levels.
Ongoing actions:
- We are utilizing existing inventory from all locations to fill most urgent voids, ensuring we are taking inventory imbalances to allocate material to critical situations.
- Where necessary, our Technical team is identifying alternative concepts that will not disrupt production to temporarily relieve a short-term gap on a low inventory product.
- Air freight of finished goods has been ongoing where deemed necessary.
Status:
Demand increased greater than forecast level leading to extensive lead time increase, mainly for (monolithic mixes) and (mag-chrome) products.
- The production gap has not been fully covered by the safety stock levels.
- Replenishment of safety stock in alignment with the changed demand is ongoing.
- Regarding MUH (furnace mixes) for NAM, efforts to alleviate the European supply stress with Dola products from York Plant proved unsuccessful in the short-term, as we experienced the production disruption in York, along with necessity to increase raw material levels.
Ongoing actions:
- We are utilizing existing inventory from all locations to fill most urgent voids, ensuring we are taking inventory imbalances to allocate material to critical situations.
- Where necessary, our Technical team is identifying alternative concepts that will not disrupt production to temporarily relieve a short-term gap on a low inventory product.
- Air freight of finished goods has been ongoing where deemed necessary.
