Global Steel Update
Steel and wire prices are set to rise but what is driving the increase?
In recent months steel commodity pricing, like other consumer products and manufacturing inputs, has been on a steady rise without showing signs of slowing down. These increases are expected to
Their government policy encouraging
manufacturers from March, with impacts
has generated high demand on steel.
be heavily felt by wholesalers and
flowing through to end users in the months following.
Let’s dig a little deeper into what is causing these increases. Firstly, it is important to understand the key cost inputs that go into
manufacturing, the supply chain of steel wire, and external market forces that
influence world pricing. Ultimately supply vs demand is the main driver - when
demand exceeds supply, we see prices rise. Dominant increases in the steel
making world are iron ore and scrap metal prices, shipping and freight costs, and labour – all key cost inputs.
SO WHERE IS THE DEMAND COMING FROM? China, the world’s largest steel
producer and consumer has continued infrastructure development largely
unaffected in a post Covid environment.
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ISSUE 60 / MARCH 2021
the upgrade of housing and infrastructure This demand has led to a surge in raw
material needs, moving China ahead of
the rest of the world market combined, in consumption of raw iron ore and scrap metals.
This demand is increasing pressure on
normally consistent global supply chains.
The increase in freight demand combined with the Covid-19 related limited
availability and positioning of shipping equipment has dramatically increased
freight pricing. Whilst impacts are global,
the Shanghai Containerized Freight Index (SCFI) demonstrates the increase into
Australasia with shipping container prices raising over three times the cost – a 177% increase on year prior.
International indices show iron ore and scrap metal have seen a surge in the
world market. Iron Ore, the key ingredient
IMPORT COSTS New Zealand is not immune from these global trends. When prices go up it costs importers more, allowing domestic suppliers to increase pricing. Whilst this can be driven by domestic costs also increasing, New Zealand ultimately follows these global trends. It is important to note here that while China has the largest impact on a Global scale, it is the impacts felt in Australia that influence the local market as well. NZ’s only wire mill is Australian owned, and our imports of wire are largely dominated by Australian supply.
“
New Zealand is not immune from these global trends. When prices go up it costs importers more, allowing domestic suppliers to increase pricing
in wire manufacturing, has risen 40% in December alone.
WIRED MAGAZINE
