Recent market developments for steel and aluminium

Recent market developments for steel and aluminium

Hardly anyone in the scaffolding or construction industry will have failed to notice in the last few weeks that there is currently a lot going on in terms of raw material prices. Some time ago, we already reported to you on the raw material and transport price developments and the background of the shortage of raw materials. Since then, at least the prices for raw materials have stabilised again. But since the end of February, Russia's invasion of Ukraine has led to renewed significant price increases for steel, aluminium and freight rates. Read more about the current situation here.

Steel price peaks at 950 USD

There is no doubt that steel is one of the most important materials in the construction industry and in scaffolding. The fact that steel prices in particular are subject to strong fluctuations has been a topic of conversation in the industry for more than a year now.

While the price for one metric tonne of steel rebar reached a high of 794 USD in May 2021, prices eased at least slightly in the following months and remained largely stable.

This high from May 2021 was surpassed once again in March 2022. Only a few days after the start of the war in Ukraine on 24th February, the price for a tonne of steel rebar climbed up to 834 USD. On 9th March, steel prices reached a new record: about 950 USD per tonne. Currently, the price for a tonne of steel is at 942 USD (as of 4th April 2022).

But there is also something good here: steel prices have remained quite stable for the last two weeks at least.

 

Source: https://www.investing.com/commodities/steel-rebar-historical-data

 

Aluminium prices at all-time high

Aluminium, which is already somewhat more expensive, has also seen a lot of movement in recent weeks. While the price of a metric tonne of aluminium was below 2,000 USD until mid-2021, it is currently at 3,442 USD (as of 4th April 2022).

Significantly rising aluminium prices have been a topic of conversation since May 2021 at the latest. After a previous price decrease in April, prices rose continuously for the most part. In October 2021, the aluminium price reached its annual high of USD 3173 per tonne.

After a short period of price relaxation at the end of 2021, aluminium continued to become more expensive in the new year. With the onset of the crisis, there was a renewed push upwards to an all-time-high of almost 4,000 USD per tonne at the beginning of March.

Unlike steel, aluminium prices are currently still subject to bigger price fluctuations. At present, a slight downward trend is again emerging (as of 4th April 2022).

 

Source: https://markets.businessinsider.com/commodities/aluminum-price

 

Why are steel and aluminium prices rising?

With the war against Ukraine and the associated sanctions against Russia, steel supply from both countries is disrupted. This is particularly noticeable in the European Union, where Ukraine and Russia together account for one fifth of steel imports. Read more about the price development of steel in recent months here.

The aluminium price is also reacting to the sanctions against the Russian economy. Although aluminium exports from Russia to Europe and America have not yet been directly affected by the sanctions, the sharp rise in energy prices has also had a considerable impact on the costs of energy-intensive metal production. While energy prices had already risen significantly during the last year, they are increasing again due to Moscow's threat of an export ban on oil and gas.

Rising production costs for metals are now adding to the price developments that have already preceded them. In particular, the decline in aluminium production of China, the world’s largest aluminium supplier, is a determining factor for the current price development.

The reason for the shortage on aluminium is the reduction of Chinese magnesium production to meet the CO2 neutrality targets. This is because about 85 per cent of the world’s magnesium, which is necessary for the production of aluminium, comes from China. This also has an impact on aluminium production in other countries that depend on magnesium imports from China. In combination with the Chinese government's restriction of the smelters' energy consumption, these factors led China to import more aluminium to meet domestic demand. Then, in November 2021, an explosion at an aluminium smelter in China's Yunnan province with a capacity of 300,000 tonnes caused the price of aluminium to rise again by 2% - 3%. At the same time, global demand is rising due to the recovering economy - boosting prices further.

But better news is also on the horizon: Chinese metal production is being ramped up again, so that an increase in exports to Western countries also becomes more likely again.

Increasing freight rates are also reflected in raw material prices

Whether by sea, land or air - the transport of products has also been significantly cheaper in the past. The logistics disruptions of the last 2 years and the associated increased transport costs are also reflected in the steel and aluminium prices. Stay tuned for our next blog post to learn more about the current situation in logistics and transport and how you can cope with the rising prices.

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