Steel price could rise by two thirds this year

Steel prices could go up by two-thirds as raw material costs rocket and suppliers look to recoup profits hit by the recession.

Big rises in iron ore and coking coal used to produce steel are being blamed as well as increasing demand as the world economy begins a recovery from recession which led to a record world production of 1.4 billion tonnes last year.

Yesterday, Tata Steel said it was adding £95 a tonne to the cost of structural sections from March 6, blaming the increase in raw material prices accelerated by the recent flooding in Queensland, Australia.

This has seen the mines that supply coking coal, used to produce steel, unable to operate.

The producer’s commercial manager for sections, Mick Maloney, said demand for steel was recovering.

“The recent extreme flooding in Queensland has led to spot prices in coal and other raw materials markets,” Maloney added.

But Derek Tordoff, the director general of the British Constructional Steelwork Association, which represents suppliers and contractors, said the expected figure of £700 per tonne over the summer would still be less than summer 2008 prices when demand was at its peak.

“It’s forecast to drop to autumn 2010 prices this autumn so it will be a temporary hike over the summer,” he said. “I think it’s only going up to reflect the shortage of coking coal.”