Rapid collapse of prices for steel products

In summer last year the manufacturers of tin plate packaging and closures still faced drastic rises in the price of supply materials. Then the December motto ran: feedstock prices for sheet steel packaging no longer follow spot market prices. The result is great insecurity amongst steel processing companies and their industrial buyers.

The background for the price increases announced in mid 2008 for feedstock for sheet steel packaging were tin plate producers’ intentions to impose a minimum 30% price increase for packaging steel by January this year. From January to June 2008 prices for tin plate feedstock – hot rolled strip – had gone up by 50%. Tin plate producers were in turn compelled to push ahead with a major part of these 30% price increases originally scheduled for the first quarter 2009 already in 2008. This created an extremely precarious situation for the manufacturers of sheet steel packaging since 65% of their value added depends on the upstream supply material price.

Now the most recent developments in steel markets have created even more insecurity in the industry and in the buying sectors. The noticeable slump in demand felt after the price increase has made most steel working companies change their purchasing behaviour by withdrawing the purchased steel volumes from the contract market and adjusting them to spot-market prices – wherever possible. Since these developments have “mapped” the sector-relevant price indices the steel working sectors of industry can no longer see the development of their supply material costs reflected in these price indices in the current business situation. Furthermore, they continue to be tied to the contract market as before.

Explaining this Peter Fish of MEPS Ltd., Sheffield, said: - Like other suppliers of steel market information and price indices we in our publications have also followed the current market trends and currently display price trends on the spot market and in service centres predominantly. This is why the actual trends in supply material costs for some, few sectors of industry, as in the manufacture of sheet steel packaging, deviate from our trend forecasts.