Uncertainty around steel prices looks to continue into the final quarter of 2023, according to industry sources.
While energy costs have eased somewhat, high production costs and ongoing geopolitical tensions persist, meaning businesses are being cautioned to expect ongoing volatile material prices.
Structural steel prices had bucked wider trends. Where construction material prices were rising by an average of 4.7% in April, steel prices had been falling in the first two quarters of the year, dropping by around 20% from their peak at the start of 2023.
This followed 2022’s jump in prices when costs for mild steel, aluminium and stainless steel peaked due to the supply chain shortages and rising energy prices exacerbated by the war in Ukraine. However, lagging demand caused a levelling out, with businesses slowing production to cope with these higher material and energy costs. By January 2023, the price of steel had dropped back from its Spring 2022 peak by 31%.
Mild and stainless steel prices, which peaked in Spring 2022, are falling back, for example. Lower demand for these products pushed prices back, even as energy-related production costs have soared.
Lower demand, being seen globally including in key regions like China, is leading this overall price deflation in the UK’s steel market.
While this didn’t bode well for the wider steel industry, it offered some breathing space and opportunities for cost savings or growth for buyers.
There are some steel material prices performing differently too. Despite predictions that steel plate prices might fall, these stayed higher during the first half of 2023, even rising slightly following mill price increases.
And in July, British Steel announced a £30 per tonne price increase on structural sections. Addressing both its stockholders and customers, the steel producer said these latest UK steel prices had been driven by ongoing high costs of raw materials and inputs.
Nevertheless, the World Steel Association has forecast a modest year-on-year growth in demand for steel of 2.3%. This April prediction was more than double its earlier prediction of 1% growth, from October 2022 forecasting.
The steel market is impacted by a range of global economic and geopolitical factors.
In a number of key economies, interest rates and inflation have been rising. In both the UK and the US, the former has reached 5.25%. In the UK these have been raised in attempts to curb rising inflation, which has topped 10% in recent months. These economic factors slow spending from consumers and businesses alike, slowing demand and impacting prices for commodities like steel accordingly.
Inflation and geopolitical factors have also driven up costs for energy and fuel. Following the lifting of lockdown measures from the Covid pandemic there was an uptick in output pushing up demand for commodities and, therefore, their prices. However, as above, this was soon followed by the onset of the war in Ukraine, impacting the supply of energy and fuel and further pushing up prices. Domestically, this has also slowed spend, demand and output from businesses, while globally it has pushed up prices for the production of commodities.
Steel industry leaders are encouraging businesses to remain agile in the face of these ongoing challenges. metals4u has advised a ‘little and often’ approach to buying. Businesses could enjoy overall cost savings by shifting to buying smaller volumes more frequently, over bulk orders, given how mild and stainless steel prices fluctuate according to supply and demand.
At ADS Laser Cutting, we proactively manage supply and pricing to support our customers in navigating and mitigating market uncertainties and price volatility. Chat with our team today for guidance on how best to forecast and plan for the latest UK steel prices.