Global trends in raw material input prices influencing the price of steel
Why are sheets made of steel and galvanized steel more and more expensive?
Why do we have to dig deep into our pockets to buy these commodities?
What's going on the steel market?
Everyone, who buys and further processes these materials, is wondering what's going on on the steel market and whether the increase in prices of input materials is the reason to increase the price of steel. Let's focus on this topic from the steel producers' point of view.
What are the most influential factors affecting the steel production?
- Coking coal price
- Iron ore price
- Steel scrap price
- Zinc price
In 2016 coking coal price reached the level of 215 USD/t which means the increase of 122USD/t since the coking coal price at the beginning of the year was approximately 93USD/t
In 2016 the price of iron ore increased from 42 USD/t to 73 USD/t which means the increase of 31 USD/t
The price of steel scrap has increased from 184 USD/t in January to 264,77 USD/t at the end of November 2016 which means the increase of 80,77 USD/t
The price of zinc has increased from 1599 USD/t in January to 2735 USD/t in December 2016 which means the increase of 1136 USD/t
What are the main reasons for such rapid growth of input materials prices?
- One of the main reasons is lower production of coal based on the decision of the Chinese government to stabilize the coal price. To reach this goal the Chinese government decided to reduce the number of working days. Instead of 330 working days they agreed on 276 working days per year. The aim was to improve the profitability of mining companies with significant debt.
- Due to the recent floods in Shanxi province Australia became the main supplier of coal. However, even the price of coal from the Australia increased because of the unexpected shutdowns in mines.
- At the beginning of the year the analysists expected a decrease in coal prices which should have resulted in decrease in interest of mining stockholders. However, the price of coking coal has increased of more than 164%.
- The last surprising fact was that the Chinese government invested a large amount of money into the bank system, which improved the state of the building industry and it also improved the demand for input materials for steel production such as coking coal and iron ore.
During the year 2016 the prices of all important input materials used for the production of steel and steel products with the addition of zinc increased. In 2016 the anti-dumping duty on cold rolled material from Chine was imposed. Everything indicates that such increase in prices is justified. We will see what the new year will bring. Let's believe that the price of steel and galvanized materials will be stabilized and we won't be force to speculate whether there will be another increase or decrease each month.