Raw material prices still soaring, leaving buyers and traders dizzy
The steel market is facing massive changes and the significant rise of raw material prices in 2010 is reminding people of the sudden dive of steel prices in 2008. Traders and buyers describe the price rises as “crazy,” as in many places, demand remains soft and they fear an imminent collapse.
In contrast, steel producers claim that raw material costs are soaring, though few firm prices for 2010-11 have been announced. From December 2009 to March 2010, a close examination of trends reveals that scrap has risen by at least 25% and spot iron ore by 30%.
Year on year, iron ore costs for steel producers are expected to rise by 50% or more. Some talk of 100%, but no deals have yet been concluded.
What affects will these developments have on the immediate future of the steel market? Roger Manser, Steel Business Briefing’s Managing Editor says, “The market is very unsettled. Some buyers are becoming more cautious than they were as they fear an abrupt drop in prices; others are buying more as the fear further price increases.”
SBB believes a collapse in finished prices is unlikely in the immediate future. However there are certainly downside risks. The main possibility is a sudden cooling of the Chinese economy by Beijing, resulting in much less price pressure on all main raw materials.