While global car production is suffering from the shortage of semiconductor chips, the production of electric vehicles faces the additional obstacle of insufficient capacity of electrical steel, according to analytics agency IHS Markit.

Manufacturers of diverse machineries are struggling to negotiate supply contracts with steel mills for 2022, particularly for electrical steel, says John Anton, director of pricing and purchasing at IHS Markit. Carmakers have been notified by steel mills that they will be on allocation for electrical steel for all of next year. Most carmakers expect to get only 80 to 90% of their requirements.

“The impact of the electrical steel shortage could potentially be as damaging to the global economy in 2022 and 2023 as the semiconductor shortage [was in 2021],” Anton states. “If electrical machinery companies do not get the electrical steel they need, buyers will have to deal with much longer lead times and higher prices.”