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.