STEEL PRICES ARE UNPARALLELED IN RECENT HISTORY

With global steel production and consumption running at all-time record highs, steel prices right around the world have been showing prodigious gains. Conjoined economic recovery in Japan , Europe and America lies behind the sensational increases that have been seen. Additional factors are surging infrastructure and business developments in China , India and some other countries.

Comparing July/August prices in 2004 with those for the same period in previous years, it is clear that current values are unparalleled in recent history for most parts of the world.

Perhaps the most extreme example is the USA , which has seen quite unheard-of gains in price as mills have successfully striven to pass on increases in costs for raw materials, energy and transport to their customers. They have used both basis price increases and special surcharges to achieve this.

The US transaction price for hot rolled coil in the third quarter of this year is at over $US700 per tonne – a figure which is more than $US200 higher than the previous record of $US495 per tonne recorded in the third quarter 1988. US coil prices have shot up by more than 125 percent in the last twelve months. Since they touched their low point of $US225 per tonne in period three 2001, coil prices have advanced by a remarkable 215 percent.

Part of the increase is undoubtedly attributable to the rationalisation of the US steel industry in the last couple of years. Some is due to shortages of raw materials, particularly coke. A proportion is the result of a reduction in import competition. Narrowing of the cost advantage traditionally held by mini-mill sheet producers, as a result of the rise in prices for scrap and the shortage of alternative furnace feeds such as pig iron and DRI/HBI is another factor.

Industry rationalisation has also been partly responsible for the surge in hot rolled coil prices in Japan . There, the third quarter price of ¥62,000 per tonne is 37 percent higher year-on-year, and 153 percent above its 2001 low point of ¥24,500 per tonne.

In addition to the domestic recovery in demand, high export sales are helping to buoy up Japanese steel prices. The country’s steel exports reached a new record level of just over 18 million tonnes in the first half of this year. This was a 7 percent increase on the 2003 performance.

Looking at sections and beams, some of the same factors lie behind current price highs. In the USA , in spite of additional capacity coming on to the market, transaction prices for sections have jumped by almost 80 percent over the last twelve months. The current level of $US590 per tonne is about 25 percent above the previous record high seen in 1988.

Sections prices in Japan have mostly been below ¥40,000 per tonne over the last decade. The so-called “H-beam war” – an intermittent struggle for market share between mini-mills and integrated mills – ensured no substantial gains. But today sections prices have surged to ¥67,000 per tonne: an astonishing rise of 135 percent since mid 2002.

Mills in the USA and Japan are likely to report a very strong level of steel output this year. Tightness in raw material supplies should not prevent Japanese crude steel production exceeding 111 million tonnes, its top point for more than a decade. US steel making looks set to be around 94 million tonnes - a four-year high.

STAINLESS IS ALSO PARTICIPATING IN THE STEEL PRICE BOOM
MEPS - World Stainless Steel Product Prices currently stand at close to their highest point of the last few years. Comparing transaction prices over our reference period from January 1997, todays values in the EU, Japan and USA are all well above their previous best, which was reached in mid 2000.

In the EU, the grade 304 hot rolled coil transaction price, equivalent to $US2240 per tonne, is up by more than 46 percent since this time last year. In the USA , likewise, the current price of $US2136 per tonne is 46 percent above its level in 2003. In Japan , the hot rolled coil price of $US2306 per tonne is 58 percent higher than in August a year ago – showing the success that mills have had in passing on alloy costs to their customers.

Grade 304 cold rolled coil prices have shown a similar development. Our World Transaction price now stands about 40 percent higher than it was twelve months earlier and is also well above its previous peak four years ago. In July 2000, cold rolled coil was selling for the equivalent of $US2120 per tonne. Today’s World Price at $US2382 is 12 percent greater.

It is not coincidental that, in 2000, steelmakers witnessed the last period of elevated nickel prices. For much of the first half of that year, nickel was traded on the London Metal Exchange at between $US9,500 and $US10,000 per tonne. Consequently, prices for 300 series stainless were at lofty levels. A jump in world stainless production was also reported - adding to the pressure on raw material supplies.

The current period of high nickel costs has been accompanied by increases in other inputs. The ferrochrome price has doubled since the start of 2003, and non-alloy scrap has also surged in value.

Nickel of course has been the dominant factor in setting prices for austenitic stainless products. The extraordinarily volatile LME settlement price plummeted from over $US17,000 in January to below $US11,000 in May, before recovering to around $US14,000 per tonne at present. Today’s alloy surcharges for cold rolled 304 are more than double what they were twelve months ago.

With both nickel and chromium in fundamental under-supply, surcharges seem sure to remain the dominant force in the market for the rest of this year and probably beyond. Stainless demand remains strong, but mills may find it difficult to raise basis prices.

They'll even take the remains of donor vehicles away for nothing now, whereas I had to pay £30 a year ago

JohnN

But then I did buy my steel a year ago

[Edited on 13/9/04 by JohnN]

Makes me glad that i am in the recycling game. For a change.

We are getting some good prices for scrap metals arising from our demolition jobs.

Plastic prices are on the up too.

Do I take it that there is a price increase looming for your kit?
Ian

Hi.

Luego and all manufacturers of steel products or associated with steel products will have to make an increase in the price. We have absorbed the increase for nearly a year, the problem is the steel price is still rising!

Best Regards, The Luego Team.