The MEPS World Average Steel Price Declines, in
October, Despite Electrode Supply Shortage
The increased cost of consumables - notably graphite electrodes, which are used
primarily in the scrap-based steelmaking process - has pushed European steel
prices upwards. However, MEPS’ research, in October, suggests that the impact
from the shortage of electrodes, has distinctly varied from region to region.
Electrode prices rose significantly as a result of capacity cuts, in China, as
the government took steps to curb pollution. Global steel manufacturers have
expressed their concerns - with the likelihood that producers of long products
will limit steel supply if the situation intensifies.
In an attempt to recoup their rising input expenditure, many European
steelmakers proposed the introduction of a formal surcharge. MEPS understands
that steel buyers are resisting this initiative - instead preferring the mills
to include the increased cost in the negotiated basis price.
In contrast, many major North American steel producers have long-term price
agreements with electrode manufacturers. As a consequence, the influence of
rising electrode values on US and Canadian steel selling figures has been
minimal, so far. Many US steel market participants remark that regional mills
are struggling to implement proposed list price hikes, owing to a reduction in
other input costs, such as scrap and iron ore, in a sluggish trading
environment. In fact, a number of North American long product suppliers
announced significant list price reductions, for medium sections, beams and
merchant bars, in an attempt to secure fourth trimester orders.
As a consequence of the price downturn in North America, the MEPS world average
steel price declined by 1.7 percent, month-on-month, in October. Global
steelmakers, keen to stay ahead of rising electrode costs, are likely to take
measures to prevent further price erosion, in the coming months. However, MEPS
predicts that global steel values will remain on a mildly negative trend for the
remainder of 2017, because of weakening demand conditions.
MEPS - International
Steel Review - October 2017 Edition
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