Global price rises of steel - an industry phenomenon

01 Apr 2004

As the raw materials and shipping industries stretch to meet spiralling global demand, News, looks at the economic pressures affecting steel producers that have led to recent price increases.

Corus, and the rest of the steel industry, are seeing an enormous growth in demand for raw materials, fuelled to a large extent by China’s rapid industrialisation.   The phenomenal growth rate in China is causing a huge hike in its steel requirements, and the industry is stretching to feed the country’s needs. As a result, international demand for steel is set to outstrip supply for the first time in four decades. This obviously effects steel output but further down the supply chain it also has an impact on other products made from steel such as rail.

The rocketing level of demand from the Far East is having an unprecedented impact on global commodity prices.

Raw materials for steel have increased in price as a result of the high levels of activity in the market. The cost of scrap, coke and coal for example has risen sharply in recent months, along with freight and energy costs. Spot freight rates, for example, are now three times higher than they were a year ago. This is set to continue.

Corus, along with steel makers around the world, has been unable to absorb such as steep and sudden rise in its input costs and must therefore look to offset them.

Jon Bolton explains what the rail business has done as a result of the current economic situation:

“The rail products business has been able to absorb small increases in input costs over the years, however the likes of what we are seeing today and those which are forecast for the future are unprecedented, we cannot continue to absorb them.

We announced on 4th March that the rail products business would raise its prices by Euro56 per tonne on all of its products from April 1st. Since then the business has decided to apply an additional surcharge to cope with these unprecedented rises. A surcharge of Euro50 per tonne will come into effect on May 1st.

As you would expect we are speaking to our customers about this issue.”