ConstructionWorX DIGITAL
The Steel Deal – two sides to the story As the consumers of steel know only too well, the costs and availability of steel have rocketed in this year. A number of factors have coalesced into a perfect storm affecting the post Brexit UK market. But the steel manufacturers have not had it all their own way. Joanna Oliver MBE reports. UK Manufacturing Blast furnace production in the UK is led by British Steel (Chinese owned) and Tata Steel (Indian owned). Electric arc production is headed by Liberty Steel - currently suffering financial challenges due to the collapse of Greensill Capital. Although much excitement is generated by the promise of fossil free and carbon neutral steel, and manufacturers roll out their road maps apace, significant development work remains to be done before commercial “green” production can be assured.
The Background As Covid gripped the globe, European and North American demand dropped considerably. European steel mills reduced output, furloughed employees and idled blast furnaces. By the end of 2020, across all markets, steel mills generally saw an increase in activity as manufacturing gradually ramped up, resulting in an increase in demand. This demand outstripped available capacity - blast furnaces are
not quick to turn back on again. Restricted supply resulted in sharp price increases. Several steel mills pushed OEMs to settle Q1 2021 prices earlier than usual to lock in capacity and secure supply, most begrudgingly paid the increase of up to €100 pt to secure volume. That turned out to be a highly fortuitous move as raw material price hikes far outstripped the gains many mills thought they had secured. In addition to the demand based increase, inputs of iron ore and coking coal prices rose dramatically and scrap prices followed. Every sector was looking for more volume to cover the increase in demand. China, for the first time, started to import foreign scrap. In anticipation of huge demand, prices rose very quickly, with Turkish scrap prices reaching $500 pt. To complete the picture, the UK operated a quota system for steel imports from the EU across a number of steel product lines. Several countries reached their quota as soon as Q2 2021, meaning any additional volume coming in to UK was subject to 25% duty.
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