<h1>Engineering Steels - Market Conditions</h1>
Since the start of 2017 the global engineering steels market has seen sustained high demand which has inevitably resulted in rising prices.
Since the European mills returned from their summer shutdown period these price increases have gained momentum, and below we will explain some of the main influencers, detail and rationale for these increases to try and aid you, our customers, when facing these raw material increases.
Commodity Prices
Scrap prices are now at a 3-year high and alloy elements have also seen sharp increases which have pushed up the surcharges, (set and published by the local steel producer in each national territory) as we have progressed through the year.
The chart below shows FOB Rotterdam and CFR Turkey for HMS scrap movement which are most relevant to our market. The increase below represents circa $150 per tonne over the last 12 months and with 1.1 tonne of scrap required to make a tonne of steel this element alone adds $165 per tonne to steelmaking costs.
Please visit www.hillfoot.com to see full details and trends of all surcharges relating to grades.
Exchange Rate
The £ remains extremely weak against most currencies and with the BREXIT uncertainty likely to be rumbling on for at least another 18 months, the value of the £ is likely to remain very weak especially against the Euro. The decline in the £ over the last 2 years from €1.42 to €1.09 has effectively added circa £150 per tonne to the cost of mainland European imported steel. Many pundits are now forecasting that we could see the £ drift to parity against the Euro which would add another £45 per tonne to UK imports!
Increasing Energy Prices
Steels producers are extremely high energy consumers and with the steady rise in the oil price in the last twelve months this has now started to impact on the energy contracts the steel mills can secure.
Exceptional circumstances - Electrodes
Graphite electrodes are used in all electric arc steelmaking plants and have now increased from $3000 per tonne to circa $42,000 per tonne. The rapid growth in prices is basically due to a large supply shortage of needle coke which is one of the main raw materials in the production of graphite electrodes. Also, environmental restrictions now being imposed on China, which produces over 60% of the global supply of these electrodes, are affecting production. Forecasters predict this shortage to last through 2018 and into Q1 2019.
Please see links below to various news articles for further information:
Summary
All the above factors have come together in a ‘perfect storm’ leading to a rapidly changing market. Steel producers are not only trying to keep pace with high demand, but rising costs from the various factors outlined above mean they have no choice but to increase prices just to stand still.
At Hillfoot we have the advantage of many years trading relationships with the major global engineering steels producers and at times such as these where supply is restricted and lead times lengthening we are fortunate to be able to secure our supplies and stocks due to these long-term partnerships.
We will of course keep all our customers informed as the market continues to move and do all we can to aid the supply chain pressures we all currently face.
Should you have any questions about this or require some advice about market conditions, please contact us.