Steel users brace for price shock

Hugh Stringleman

Friday 26th March 2004

Construction companies face structural steel price rises of 30% in very short order.

Chaos on world steel markets has pushed up prices for all grades, along with shipping cost increases and a general world shortage of coking coal.

Some Asian and Australian suppliers have deferred delivery times and are refusing to quote on new business.

New Zealand is buffered by good stock levels of imported structural steel, and its domestic production from iron sands and scrap.

Nonetheless, price rises would follow the unprecedented world demand, driven by Chinese building activity and shortages of raw materials.

Fletcher Easysteel general manager John Beveridge said he was well- stocked with structural steel and "not panicking."

He had advised customers of 10% price rises, equivalent to $100 a tonne, each month for the next three months.

"Against a background of commercial building consents rising rapidly, there are likely to be some angry customers," he said.

"Until this explosion of demand worldwide late last year, international prices had been steady or declining for seven or eight years.

"So companies which entered long-term building contracts expecting stable steel costs will now be disa ppointed.

"Smaller steel merchants are struggling to get supplies but Steel & Tube and ourselves have good stocks."

Smaller price rises have been advised by Fletcher companies for scrap-fed steel products, like reinforcing rod and mesh.

In Australia, steel producers One Steel, Smorgons and BHP Billiton have been enjoying increased domestic demand.

OneSteel owns the Wellington-based Steel & Tube Holdings in New Zealand, where chief executive Nick Calavrias confirmed price rises of up to 40% on structural products flowing through now.

He said flat-roll products would face smaller price rises of 10-15% and cladding products (roofing iron and other pressed sheets) of 5%.

Calavrias believed there was no danger of New Zealand industry running out of steel products and if import consignments were deferred, another distributor may have stocks.

A European commentator, MEPS, said steel was experiencing a "raging bull market."

"Record levels of global steel production have drained all the available supplies of ferrous raw materials.

"Panic reigns, as the shortages and other cost increases are pushing steel prices up dramatically for hot-rolled coil.

"Values in March are expected to be at an eight-year high and some mills are putting customers on allocation," the newsletter said.

News of the domestic steel price hikes emerged at the same time as plastics industry players warned of similar price pressure to come for similar global reasons as those driving up steel prices.

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