Keeping a Steely Reserve - BEAMA's Tips For The Future
With short supply threatening steel prices yet again, BEAMA’s Steel Products Group is on record reporting rapidly increasing raw material prices. With steel leading the way, the Group warns future price increases will impact.
A Group spokesperson commented: “Steel is now traded on the London Metal Exchange and therefore a futures market exists. In this respect, its price now behaves more like that of copper."
“Driven by supply factors, it’s a situation progressively worsening, echoing the situation of four years ago when the price of steel rose by 50%. With the UK likely to suffer more than mainland Europe, due to fewer suppliers, industry sources believe the UK will experience a supplementary increase of up to $140/tonne. The implications for contractors and manufacturers are serious.”
The Group cites many factors for steel shortages and consequent price rises. Notably, home demand from Asia, previously a low cost exporter, has doubled in ten years making the region a net importer. However, other, more fundamental factors have emerged. For instance, rising fuel costs, dearth of basic feedstocks - iron ore, scrap, coke.
Industry sources indicate coal prices are now agreed, albeit at higher levels. However, iron ore contract negotiations are continuing, and the price of scrap has grown by $500 per tonne. Arcelor Mittal CEO Lakshmi Mittal said recently: “Steel prices will rise further in the rest of 2008 as steel producers pass on continued cost increases to consumers.”
Steel making is a cyclical activity and is currently at a ten-year high. Markets are strong. The problem is not just price - some stockholders have allowed stocks to diminish, worried by the financial risk of replacing them at current prices - this has an impact on availability.
For manufacturers and electrical contractors, all this means uncertainty, deferments, frustration, inevitable cost penalties. BEAMA’s Steel Products Group members - manufacturers of steel cable tray, ladder and support systems - are reassuring customers they are doing everything possible to get supplies through the distribution system on time, and at the most competitive prices.
The Group urges contractors, wholesalers and specifiers to be aware of the difficulties manufacturers are labouring under in this current climate. Steel producers started to implement a series of increases in January 2004. This was hard on the heels of increases already applied end 2003. Since then, the world’s steelmaking capacity has been restructured with a few key global players taking control.
Prices for some grades and configurations of finished steel stock have doubled in recent months. This summer will be a critical phase. ArcelorMittal has announced new prices for July deliveries, leaving Corus to reveal its intentions. Continuing pressure could see further announcements this September.
Electrical industry manufacturers must continue fulfilling contracts and deliver on time. Valued customer relationships will be respected, long–standing customers better placed to receive supplies.
Steel pricing tips for contractors:
· Buy steel-based products from reputable, well-recognised suppliers.
· Check products are available.
· Confirm actual prices with supplier (days gone of discounted products when steel supplies once abundant).
· Order in advance.
· Expect steel prices – and thus of end products – to further increase.
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