Metal Supplies and Steel Costs Cause Crisis Concerns

Warnings about the availability of metal and its rising prices, particularly of steel, is causing widespread concern in the construction industry.

The Iran conflict and its impact on energy and transport costs is having a knock-on impact on metal prices. Aluminium prices have risen by 21% since the war began, whilst copper prices rose by 5% in May.

European steel prices have risen 6% since January, whilst the cost of Chinese steel increased by 10% in the same period.

Paul McFadyen, Chairman of metals4U, an online specialist metal supplier, said: “Metal prices have shot up in recent months, driven largely by the conflict in the Middle East. Disruption to oil and gas supplies have caused energy prices to soar, in turn causing metal production costs to rise, and increasing the overall cost of materials for end users, including tradespeople, construction firms, and manufacturers.

“Other ongoing factors have also been contributing to price increases, such as an ongoing shortage of copper, and restrictions placed on the trade of certain metals in their countries of origin, with China being the most noteworthy example.

“These price increases are bad news for the construction and manufacturing industries, which rely heavily on bulk orders of large quantities of metal. The impact on these sectors will also affect the economy as a whole, with any slowdown in the manufacturing and building sectors being felt on the UK’s GDP.”

Steel Tariffs

Today, there are also reports of the Construction Leadership Council (CLC) urging the UK government to delay tariff increases on steel, due to be introduced on 1 July.

The government plans to reduce the quota of tariff-free imports by 60% and apply a 50% tariff to imports above those thresholds. The aim is to protect UK steelmakers from an import dump of Chinese steel and to bolster UK steel production.

In the Financial Times report, the CLC are said to warn that the quota reduction risks causing “significant” shortages in key steel products.

This follows confirmation that Tata will have to wait at least another 12 months for a National Grid connection to enable its new electric arc furnace in Port Talbot to become operational. Once connected, the new furnace will create a UK steel supply from recycled steel of around 3 million tonnes each year. The National Grid, which was privatised in 1995, has been criticised by MPs, MSs and unionists for a lack of investment in the electrical network, hampering economic expansion.

Supply Shortages

CLC claims that “the UK construction sector cannot currently source all required steel grades and volumes from domestic producers alone.

“This creates a real risk of supply shortages alongside price increases. We therefore respectfully urge the government to consider a delay in the implementation of these tariff measures, or the introduction of transitional arrangements, until market conditions stabilise,” the CLC document continues.

The CLC warned that there were “present severe and immediate risks” that would add to rising material prices of construction products, as a result of the Iran conflict.

The FT cites the rising cost of structural steel – from about £700 per tonne at the start of this year to around £950 per tonne in April.

Challenging SMEs

The rising cost of steel and other metals used in construction are particularly challenging for SMEs that make up the majority of businesses in the sector.

Paul McFadyen adds, “For individual tradespeople and small business owners, these costs are especially challenging to deal with. There is often little choice for them but to pass the costs onto consumers, but this has its own problems. Two thirds (66%) of tradespeople say that they have had payments withheld by customers within the last year, with customers most commonly disputing the final cost of the job (35%).”

For tradespeople, it is recommended to be open to the use of alternative, cheaper materials where possible and to speak to suppliers early about fixing material costs in advance. Being transparent with customers about pricing and keeping the lines of communication open are also recommended to help to avoid disputes.

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