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Steel Prices Reach New Heights - April Commercial Director's Briefing

30 April 2021

In just one month, between March and April, prices for hot rolled, cold reduced and galvanised steel have increased by around 14% - pushing them, once again, to previously unseen levels.

With supply more constrained than ever and service centre stock levels extremely low the upward pressure on prices is expected to continue. Understandably, this is of huge concern to end-users both in terms of price and an ongoing shortage of supply. Not to mention the challenges associated with the increasing strain being put on trade credit limits throughout the whole supply chain.

The question everybody is asking, therefore, is - are these increases sustainable? In the short term, the answer is yes - with further increases likely.
Lead times from European mills are now out towards the end of 2021, with many not able to offer capacity for quarter 4 supply. Where they are able to quote, their offers have extremely short validity and are quickly replaced with higher proposals.
Moreover, uncertainty surrounding the future of Liberty Steel is also of concern and not just from an employment perspective. If its financial future is not secured then European capacity will be reduced, further constraining supply.
All of this is compounded by the Chinese government’s decision to reduce their export rebate and a general shortage of competitive imports into Europe.
Under these circumstances, at Cooper and Jackson, our focus remains firmly on maintaining the supply of material for our customers by leveraging our independent status to source material from our network of global partners.
As I pointed out last month, our options are limited by import quotas and difficulties obtaining firm commitments on pricing, but I’m extremely proud of how hard our team has worked to meet customer needs.
The longer-term view on pricing is, as always, more difficult to predict. It perhaps goes without saying that prices cannot continue to increase indefinitely and that they will weaken at some point. However, this does not look likely during 2021 due to the conditions I have outlined above.
More generally, it seems likely to me that European producers will now look to better align their capacity with demand so that they are able to operate at a more profitable level. It raises the question, are we currently seeing the ‘true value’ of steel?
You could argue that decades of under-investment in the European steelmaking industry and an over reliance on cheap worldwide imports has ultimately led us to the trading conditions that we’re experiencing today.
It would be no surprise, therefore, if European producers seize the opportunity to re-align capacity with demand and build a more sustainable pricing model. If this proves to be the case, we might have to adjust to prices being at a higher level than we have been accustomed to over recent decades.

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