Local steel prices to rise due to tight global supply

Local steel prices are likely to go up due to the prevailing tight global supply.

The very tight supply of steel materials from foreign mills in Japan, South Korea, Taiwan, China and some European mills has caused global steel prices to surge.

Hot rolled coils (HRC), which is used to produce cold rolled coils, pipes, tubes, c-purlins and structural members are priced currently at $450 to $550 per ton FOB (freight on board) against $300 from the fourth quarter of 2005.

Cold rolled coils (CRC), which are used to manufacture galvanized sheets and as material for fabricators, appliances and vehicle assembly, are now fetching a price of $600 to $700 per metric ton from the same mills.

These prices are 50 percent more than those in the last quarter of 2005.

Another major material for galvanized products, zinc ingots and slabs, are also in short supply and their price has risen to historic highs never before experienced worldwide.

At the current London Metal Exchange price of $2,600 per ton, this is almost double the prices a year ago.

The raw material for the manufacture of reinforcing bars or billets is now at $360- $375 per ton FOB, while scrap price is at $250 per ton.

As prices of their raw materials soar, officials of local steel manufacturers warn that the prices of steel construction materials such as re-enforcing bars, GI sheets, colored roofing sheets, metal pipes and structural steel would have to be increased for them to recover their costs.

Local steel manufacturers said that the landed costs of these materials are now higher due to the expanded value added tax. Were it not been for the strong peso, the landed costs would be higher, they said.

For GI sheets or roofing materials, there will be a 10 percent to 15 percent increase in price this month of April.

Further affecting the tight domestic supply situation is the shutdown of Chinese steel mills after the Chinese New Year.

With the onset of summer and the start of the construction season, demand is expected to pick up and this will further aggravate the supply situation.

The construction industry is one of the anchors of gross domestic product (GDP) growth.