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Supply Chain Risk in Steel Manufacturing
Steel manufacturing and processing depends on reliable access to raw materials and critical inputs - whether that’s scrap, slab, billets, coil, alloys, gases, refractories, electrodes, lubricants, packaging, or specialist replacement parts. Disruption can quickly translate into missed production windows, delayed deliveries, contract penalties and lost revenue.
Supply chain disruption is not just about “late deliveries”. It can involve sudden supplier insolvency, transport delays, port congestion, customs issues, energy and utilities disruption, geopolitical restrictions, quality failures, or simply shortages of key materials. For continuous process sites, the knock-on impact can be amplified: furnace downtime, rolling schedule disruption, and the inability to recover capacity once a production slot is lost.
This page explains the common supply chain risks faced by steel manufacturers and highlights the insurance options that may help - including contingent business interruption, supplier extensions, cargo and transit cover, and broader supply chain solutions depending on your operation.
Common Causes of Supply Chain Disruption for Steel Businesses
Underwriters and risk managers often split supply chain disruption into upstream (inputs) and downstream (customers/logistics). Steel operations frequently face a mix of both:
- Raw material shortages (scrap, billets, slab, coil, alloys)
- Supplier failure or insolvency (single-source critical inputs)
- Transport disruption (haulage capacity, driver shortages, strikes)
- Port delays, customs issues and border checks
- Quality failures / off-spec materials forcing production stops
- Energy and utilities interruption affecting supplier output
- Geopolitical restrictions, sanctions, trade controls
- Critical parts delays (bearings, drives, motors, automation components)
Can Insurance Cover Supply Chain Disruption?
Standard business interruption insurance usually requires physical damage to your insured premises (e.g., a fire at your plant). Supply chain disruption is different: you may suffer loss without any damage at your own site.
However, some insurance solutions can help in specific situations - particularly when disruption is triggered by insured physical damage at a supplier or customer site, or when goods are damaged in transit. The key is selecting the right extensions and understanding what triggers cover.
Contingent Business Interruption (Supplier/Customer Extensions)
- Cover for loss of gross profit arising from insured damage at a named supplier or customer
- Useful where a small number of suppliers are critical to operations
- Usually requires a defined insured peril at the third-party premises (e.g., fire)
- Typically subject to sub-limits, waiting periods and insurer conditions
- Best supported when dependencies are documented and values are realistic
Cargo / Goods-in-Transit & Stock Cover
- Cover for physical loss or damage to materials and goods in transit
- Important for coils, billets, slab and high-value processed stock
- Can include storage in transit and temporary warehousing (subject to terms)
- Helps reduce disruption when delays are caused by damaged consignments
- Can be coordinated with stock cover for raw materials and WIP
Machinery Breakdown + BI for Parts Delays (Indirect Support)
- If a breakdown is insured, BI can respond while repairs are completed
- Selecting realistic indemnity periods helps address long lead times
- Some policies allow increased cost of working to fund mitigation
- Not a “shortage” solution, but reduces impact of repair supply delays
- Requires the insured trigger (breakdown) to occur
Specialist Supply Chain / Trade Disruption Cover
- Broader solutions may exist for some businesses (risk dependent)
- Can be complex and heavily underwritten
- Triggers can include certain non-damage events (wording dependent)
- Often suited to larger businesses with mature risk management
- We can advise on feasibility based on your operation and appetite
The main point: insurance can help in parts of the supply chain story, but not all “shortage” losses are insurable. The right strategy combines insurance with practical resilience planning.
Practical Ways to Reduce Supply Chain Risk (What Insurers Like to See)
Insurers and risk engineers focus on the controls that reduce dependency and improve recovery. Strong supply chain controls can also improve underwriting terms for business interruption and contingent BI.
- Mapping critical inputs and single points of failure (materials, gases, parts)
- Dual sourcing / approved alternative suppliers for key grades and consumables
- Safety stock strategy for critical materials and spares
- Supplier audits and quality assurance controls to reduce off-spec deliveries
- Contract terms covering lead times, penalties and force majeure
- Logistics contingency planning (alternate routes/carriers/ports)
- Documented recovery plans for high-impact disruption scenarios
FREQUENTLY ASKED QUESTIONS
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Does business interruption cover raw material shortages?
Standard BI usually requires physical damage at your premises. Raw material shortages without damage are typically not covered, unless you have specialist extensions or supply chain solutions with appropriate triggers.
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What is contingent business interruption (CBI)?
CBI (supplier/customer extensions) can cover loss of gross profit caused by insured damage at a named supplier or customer’s premises. It generally won’t respond to non-damage shortages unless specifically designed to do so.
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Can goods-in-transit insurance help with supply chain disruption?
It can help where disruption is caused by physical loss or damage to materials or goods in transit. It won’t usually cover pure delays without damage, but it protects the value of critical shipments.
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How do insurers decide if supplier extensions are available?
Insurers look at dependency levels, supplier concentration, location/territory, the supplier’s risk profile, and how losses could occur. They also assess how well you can mitigate disruption (dual sourcing, stock, contingency plans).
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Can Insure24 help structure cover for supply chain risk?
Yes. We can advise on contingent BI, cargo/transit and stock structures, and explore specialist options where appropriate - while helping you improve resilience planning to reduce disruption exposure.