Mill input cost increases drive global steel prices upwards

23 December 2016

Global steel selling figures have been on an upward trend throughout 2016. MEPS’ world steel price soared by more than a third, in December, year-on-year, mainly because of a rapid rise in flat product values.

Further, strong gains are likely in the first quarter of 2017, as a result of escalating mill raw material expenditure. In recent months, spot coking coal prices more than tripled, to top US$300 per tonne, while iron ore values are fluctuating in the US$70-80 per tonne range. Steelmakers, keen to stay ahead of higher input costs, announced a series of price hikes, in November/December.

Despite a stable trading environment, we believe that most producers have been successful in recouping, at least, part of their higher outlay on raw materials. In December, the MEPS world all products composite steel price increased by 6.9 percent, month-on-month.

Trade actions and a shortage of competitively-priced imports supported mills’ efforts, in the US and Europe, to lift selling values. Amid tight supply conditions, steel buyers are likely to accept the higher prices tabled by their local steel producers, in order to secure sufficient material.

We believe that global transaction values will strengthen, further, in the coming months. A slight uptick in worldwide steel demand is expected in the first trimester, as customers replenish their inventories following the year-end. However, MEPS predicts that a prolonged recovery in world steel prices is unlikely unless a significant change in market fundamentals develops.