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Subscribe to this BlogCurrent and expected effect of raw materials increases to Cold Rolled prices
Predicting price increases and the effect of increases is becoming ever more difficult. We are conscious of providing our valued customers with enough notice to adapt to any increases. This is done with the intention to avoid fixed price contracts being based on rates that are no longer available.
Recently we have only been informed of increases at the end of one month for the next month's supply; this is due to steel mills deciding what increases can actually be achieved.
Spot buying has become very unstable. There are clear examples of materials being held for the following month’s supply and sold at higher prices. Otherwise, materials that are released can quite often be at ‘replacement cost’ and well above current market prices.
Although I can understand the commercial decision, it doesn’t help the overall sector position. Making a return on projects can be challenging enough without third parties making it harder.
The increases are also clouded as the base price isn't clearly defined. Are the increases applied to the lower discounted market values that were present in February / early March or is it the base price plus increases, ignoring the actual previous market prices?
My figures suggest that coil has increased by nett 23% from late March into May and a further increase of 11% predicted in June. Albion took a decision to increases list rates by 6% in April. This wasn't enough to cover the actual increase; it should have been closer to 8%.
This is something we will have to deal with as we believe in being fair and maintaining a sustainable market in the UK construction industry, unlike the raw material providers and steel makers who are more focused on worldwide activity and opportunities.
My personal belief is the suggested increases for June and July will make it through the supply chain; however additional increases to those may be smoke and mirrors to ensure the June / July increases stick and demand remains as purchases are made to avoid further increases. I must confirm this is just an opinion.
If the suggested increases for June / July are applied, I would recommend allowing an additional 11-12% onto Albion Sections' April 2010 list price for cold rolled material required in calendar quarter 3. As soon as we have firmer information Albion Sections will make any increases known.
Please feel free to add your comments, experiences and predictions.
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