What’s Causing the Steel Price Rise?

What has an impact on the price of steel?

How steel is manufactured

Iron Ore itself is not very strong in its natural state, and it wasn’t until humans developed coal furnaces that we truly harnessed the strength and malleability of steel.

Steel is produced by melting iron ore down to its molten state in a blast furnace – a method which, despite improvements, utilises the same basic process as we have for the last 700 years – and combining it with coking coal in order to produce steel.

Material Costs

Iron Ore

Iron Ore is evidently the key ingredient in steel production, and has been increasing in price and demand since the beginning of the pandemic.

In May 2021, the Iron Ore price hit unprecedented heights, at a record $237 USD per tonne.

Coking Coal

Coking or metallurgical coal is a vital ingredient in the current methods of steel production, as it is what binds with the oxides in the iron ore, and also helps create some of the carbon content of steel.

While many are looking into so called “green steel” using hydrogen, and less carbon based materials, this technology is still a long way off being widespread.

Political and Economic Impacts

Coronavirus Pandemic

The Covid-19 Coronavirus pandemic has effected multiple parts of the steel industry.

 

Brazil, one of the worlds largest iron ore producers had to halt production due to rampant spread of the virus, shipping and transport was impacted worldwide, and many workers who travelled across state and international borders were unable to.

These factors all increased demand on the remaining supply.

Government Incentives

In order to kickstart economies, governments all around the world looked to stimulate their economic activity by giving incentives and stimulus to residents and businesses alike.

 

In Australia this, along with people being unable to travel, resulted in a construction boom, with new house starts at their highest level in over fifty years.

Existing Planned Infrastructure

Across Australia, and the world, existing infrastructure plans by state and federal governments continue to demand supply of steel products.

Such projects include The Inland Rail project, the Metro Tunnel in Melbourne, Sydney’s Sydney Metro project, and the Metronet transport network in the Perth metropolitan area.

What this means for you

The shortage of steel, along with continued high demand has not only pushed up the price of steel in Australia, but also led to longer lead times on many products, due to both increased demand on these products, but also rations placed on steel purchases by producers.

 

When it comes to water tanks, sheds and other such structures, lead times may have increased along with prices.

Southern Cross endeavours to still provide the best quality service and water tanks possible, despite the challenging circumstances.

For more information, download our eBook on the steel price rise.