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The coronavirus pandemic and the war in Ukraine caused an earthquake on the steel market. As a result, she drastically improved. After a few months of thaw, experts expect further price increases. This can have serious consequences.
– The steel market is so important and specific that
it is very closely related to other sectors of the economy
– says money.pl Michał Wrzosek, spokesman for Budimex. It’s about, among others for the armaments, railway and automotive industries, ending with the construction industry.
Steel prices and supply are not factors to be underestimated. Especially after the war broke out in Ukraine. Russia is one of the leading steel producers. After the attack of Vladimir Putin’s regime on a neighboring country, including The EU, but also the US and Canada, stopped importing the iron-carbon alloy.
As a result, panic began in the market. Steel prices almost from week to week
increased by tens of percent
. For example, the price of hot-rolled sheet jumped from around EUR 900 to nearly EUR 1,500 per tonne, according to data from Platts S&P Global Commodity Insights, which deals with, among others, comparing energy and raw material prices on commodity markets.
The problem may return this year
.
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Out of lockdown and an earthquake
Let us remind you that in the second half of 2022, steel in the world became significantly cheaper. Producers of the alloy, as a result of a buying panic, frantically began to look for substitutes for the Russian material. They found it, for example, in Asia and the Middle East. That’s how we managed to accumulate substantial stocks.
Contrary to expectations, there was no shortage of steel,
therefore prices have fallen
. They reached their lowest level in November 2022. At that time, analysts predicted that in 2023 prices would be stable. Since the beginning of the year, however, they have been clearly growing – since November they have jumped by about 20 percent.
There are many indications that
it will be even worse
. Experts estimate that the aforementioned tonne of hot-rolled sheet, which currently costs approx. EUR 700-750 in the Ruhr area, will be approx. 30-40% more expensive in the summer. (approx. 1000 euros).
What it comes from? Platts S&P Global Commodity Insights points to two countries.
Mainly China
which are reactivating the economy after the coronavirus pandemic and increasing the demand for steel. China also has an impact on global metal prices. It can be expected that Xi Jinping’s regime will absorb a significant part of the metals in Asia, which were replacing material from Russia in Europe.
Analysts also point to
Turkey
which, according to the World Steel Association, is the tenth producer of steel in the world. After the earthquake, exports collapsed as many companies had to stop production. Another issue is that the Turks themselves need as much building material as possible.
Metallurgists have room for raises. Will steel go up?
“Steelmakers say they have well-filled order books and demand remains solid.
which will further increase prices
” – informs Platts. None of the Polish steel producers and related chambers of commerce contacted by money.pl, however, did not want to answer the question of how prices will change.
In the meantime, according to Platts, more steelworks in Europe are re-lighting furnaces that were extinguished, among others due to rising energy costs, weak demand and filled warehouses. It was a good time for maintenance.
Examples? “US Steel Kosice restarted two blast furnaces in January and has since operated all three furnaces. The steelmaker has higher production costs compared to its competitors
and its production is unlikely to drive down prices
Platts writes.
ArcelorMittal, an international company, also ignites fire in extinguished metallurgical furnaces. In Gijon, Spain, it launched a furnace in January, which was shut down in September 2022.
The same happened in the Polish branch of the manufacturer in Dąbrowa Górnicza
.
Steel prices up, construction costs too
Metallurgists are gearing up for hard work, while other sectors are looking at steel rates with concern. – Steel is next to asphalt, oil and concrete
one of the four main materials and raw materials used in construction
– says the spokesman of Budimex.
Wrzosek comments that due to the earlier increases in the prices of concrete and wood, many investors focused on steel structures in their projects. Therefore, the cost of steel is a large component of the overall investment cost. As they grow – automatically construction also absorbs more money. It does not matter whether it is being built by GDDKiA, PKP PLK, local government or a private developer.
– Steel is one of the basic raw materials in construction and assembly production,
therefore its price is important for the profitability of the contracts being executed
. In the last year, we have witnessed abnormal increases in the prices of this raw material. Currently, prices are stabilizing somewhat, but they will continue to increase
will certainly have a negative impact on the profitability of already implemented contracts
– comments for money.pl Paweł Bruger, spokesman for Mirbud Skierniewice.
Valorization is not enough
The indexation of contracts was one of the main topics of the road industry in 2022. In the case of investments of the General Directorate for National Roads and Motorways, a 10% indexation limit is applied.
However, this does not mean that the value of the contract can be increased by that much
.
– A 10% indexation, and only for half of the costs, means that the costs must increase by 20%. If costs increase even more –
we will not get this money back
. It will therefore be difficult to maintain the planned profitability, Wojciech Trojanowski, member of the management board of the Polish branch of Strabag, indicates in an interview with “Rynek Infrastruktury”.
The builders add that the current valorization limit is no longer sufficient, because for some contracts from two years ago the costs have already increased by 40 percent. In addition, Strabag’s management repeats what has been said for a long time – ”
the market is very short of money from the National Reconstruction Plan
“, which, for example, delays many railway investments. Local governments are also not willing to spend huge amounts. All this additionally intensifies the problems of the construction industry.
Jacek Losik, money.pl journalist
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Source: money.pl
