Structural steel prices have increased again – the sixth price rise since summer 2020.
Steel prices have now risen by £260 per tonne since July, following this latest £30 rise from steel mills. A number of factors have created these unprecedented market conditions, including increasing costs of raw material, lower levels of scrap and post-Brexit impacts on imports.
At the same time, lender Greensill Capital – the backer behind Liberty Steel – fell into administration in early March, putting thousands of jobs at risk at Liberty’s sites across the UK. While Liberty Steel continues to run as normal, the government is in talks with its bosses to identify ways to protect the business – offering some reassurance that political and business leaders alike continue to value the steel industry. But these recent global price increases in steel will be considered beneficial to Liberty’s prospects.
The ongoing increase in costs of raw materials has been cited by BOS Manufacturers as the primary driver in impacting steel prices. Two of the commodities most important in determining the market-rate of BOS-produced steelwork increased vastly in 2020. The cost of iron ore almost doubled between March and December 2020, to a figure of $160 USD/dmt, while Metallurgical Coke also rose by around 45%. In the same period as raw material prices impact BOS-produced products, scrap prices, which impact EAF-produced steel, have also risen in 2020 by around 70%, to $425 USD/t, as levels of scrap have dropped dramatically.
Steelwork increases have been headline news of late, but in a similar manner concrete prices always seem to slip below the news radar. However, at the moment it is worth noting that rebar prices are also rising in the concrete sector. Historically, an increase in steel prices has been swiftly followed by an increase in concrete prices, by a similar margin.
Ongoing market volatility
Another contributor to the price rises, British Steel suggests, is the volatile market – with structural sections rates having been at an unsustainable level for too long, making it difficult for steel mills to remain viable. Similarly, the rates for fabricated structural steelwork are equally unsustainable, when factoring in the expertise and experience required by businesses to deliver bespoke design and detailing to fully utilise floor space.
Impact of imports
As the UK continues to settle into its new relationship with the EU post-Brexit, there is a growing impact of delays in goods being imported in from Europe.
In the steel sector this is being particularly impacted by tariff limits, which have the potential to leap by up to 25% each quarter. This risk means there is temptation in the market to bulk buy sections at the beginning of a quarter, to avoid cost increases, but thereby impacting on the availability of certain sections. For example, there is said to be a scarcity of small UB’s currently while lead times for steel decking are as high as 12 weeks. As steel beams are still shipped into the UK, bulk buys could cause problems at the ports.
There are a number of specific products effected:
- Hollow Section (in particular cold formed) – this potential problem is set to be worse for sourcing Tubes, around 50% of which come in from Turkey. While Turkey has been able to cope with steady demand over the years, the tariffs and market changes impact their ability to meet demand.
- Cold rolled coil – this is now very scarce, pointing to a potential increase in price per tonne.
- Bolts/Welding Wire – as parts which usually come in from Europe, Brexit-related changes could cause delays.
Working closely with supply chain partners and internal procurement and stores teams is essential for businesses to weather this uncertainty. It may be a year since the infamous panic buying of toilet rolls at the outset of the pandemic, but it seems we’re now seeing another type of stockpiling.