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High steel price here to stay

MATERIALS - Worldwide demand for structural steel means contractors will have to absorb or pass on rising costs

A TIGHTENING world market for structural steel will ensure the material's price will remain high, industry insiders have predicted.

A move to increase the price of structural sections by £40 per tonne is due to begin next week and the shortage of steel is such that contractors will have little choice but to absorb the costs or pass them on to clients.

Stockholders have little flexibility to offer discounted sections to clients, and steel producers are unable to climb down on costs because of high demand for steel in Europe and the steady demand in China.

Normally, some steel destined for use in mainland Europe is diverted into the UK and helps keeps prices down by enabling stockholders to get hold of more material at lower prices.

But with the construction industry on the Continent busier than it has been for years and steel building techniques gaining a foothold in the traditional heartland of reinforced concrete construction, there is unlikely to be enough spare material available for redirection to the UK market.

This will mean contractors will be unable to work out meaningful discounts for structural steel, claimed Dr Derek Tordoff, director general of industry body the British Constructional Steelwork Association.

He said: 'Generally it has been accepted that this price rise will stick.

There is little leeway left in the market as there are global pressures of one sort or another ? either the high demand from China for raw materials or increased demand for steel in continental Europe.' And contractors are unlikely to see much stock arriving from the USA.

Dr Tordoff said: 'Generally the USA sates its own market and has little leftover stock to export.' Steel prices have been tipped to leap another £40 per tonne at the end of the summer, bringing the total rise over the year to £100 per tonne ? a surge of between 15 and 20 per cent.

One north Midlands-based contractor said: 'The price rises are inconvenient, particularly with long-term supply contracts.

'At least this time we seem to be getting plenty of notice about them and are able to factor them in to most deals.'