A dramatic increase in Chinese steel consumption has had an effect for truss system holder companies in the UK: they have faced price increases of around 75% for the material which is an essential part of their production.

Weathering warnings of potential steel shortages while trying to cope with wildly rising prices has left companies having to make decisions which could still cost them in the long term.

Wolf Systems managing director David Leaney said: “We hoped the price would have stabilised by now, but we are still getting increases. Prices have risen by more than 75% over the past 18 months which has meant truss rafter manufacturers have had to increase their prices by 14-16%.

“That doesn’t make truss rafters less competitive against other products because they only contain about 10% of steel, but no increase in price is welcome at a time when the market is quite flat, although I think it will pick up in the next couple of months.”

Chinese steel mills

He believes that, in the long term, steel prices will come down. “China has built 26 new steel mills and there is potential over the next three or four years of seeing steel coming back the other way.

Mr Leaney said that 18 months ago most manufacturers would have been paying £250 a ton, but added: “Now we are talking about anything between £550-600 a ton by the end of this year.

Alpine Automation managing director Patrick Martin said: “Steel prices did not rise at the beginning of January which was a nice surprise as we had got used to significant monthly price rises throughout 2004.”

He said it was difficult to get prices in advance and added: “Our feeling is steel stockholders have adequate supply and are assessing demand and competitors’ attitude to prices almost on a weekly basis.

“Steel is an international commodity based on the dollar. With the declining value of the dollar, any upward pressure on prices is probably dissipated as a result of the pound’s comparative strength.”

Mr Martin said demand from China for US steel has reduced as China has become more self-sufficient and added: “This means that US companies holding high stocks of steel as a hedge against the rising prices of 2004 will be encouraged to de-stock.”

Supply and demand

Once that takes place, he estimates probably by the second quarter, demand for steel could again exceed supply, indicating a return to higher prices. “However, the expectation of our American associates is for price stability to be reached at the end of the second quarter, albeit at a still higher price than current levels.”

Gang-Nail Systems special products director Paul Baron said steel prices had adversely affected the building industry, from reinforcing steel in foundations to nail plates in roof trusses.

“When you consider that China, the world’s largest steel producer, increased its net imports of steel from 22.6 million tonnes in 2002 to 42.5 million tonnes in 2003, it becomes clear that steel producers were caught with their pants down,” he said.

“We have experienced increases in excess of 50% from June 2003 to December 2004. However, the indications are that prices have peaked, despite bullish comments to the contrary from some steel suppliers – the very people who should be considering a future where the Chinese economy is cooling down and a surplus of steel is on the horizon heading towards our shores.”

Simpson Strong-Tie sales and marketing director Richard Miles said the impact of rising steel prices prompted the company to review its production costs.

“While increased raw material costs of this nature have to be passed on to the customer, there is huge incentive to explore ways and means by which manufacturing costs can be contained or even reduced.

“The introduction of new and more automated production processes, including robotic and computer controlled presses, has enabled us to further reduce wastage and the labour content of the finished product.

“As a result we have been able to mitigate the impact of increased raw material costs. Hopefully, these moves and a slightly less frenetic raw material market will go some way towards reducing the rate of price increases over the next few months.”

Roy Trowman of MiTek said: “We have made a decision to put a price in and fix on it for this year, but we are taking a bit of a gamble.”