South Africa’s largest steel producer, ArcelorMittal South Africa, has announced its first price decrease for the year and will cut the price of both hot-rolled coil (HRC) and wire rod by 5% as from October.
The price of HRC and wire rod, which provide the base prices for flat and long steel respectively, will decline from their record levels, with the price to be cut by about R500/t on just about about all grades, barring plate which will remain unchanged.
Prior to September, when prices were held stable, there had been seven upward revisions in the price of HRC, which, by the beginning of this month was up by over 100% year-to-date. Similarly, there had been six increases in the price of wire rod.
Therefore, despite the October reduction, HRC will still be up 96% for the year, while wire rod prices have climbed 81% since January.
In addition, the downward revision – which is based on material reductions in domestic selling prices in the US, Germany, China and Russia over the past months, but offset against the weaker South African currency against the US dollar – might simply be a seasonal phenomenon, precipitated by lower demand traditionally associated with the Northern Hemisphere’s summer holiday period.
Therefore, steel-price observers believe it will be important to assess the price trend again in November, before assuming that the strong upward price cycle, which has been sustained for over a year now, has come to an end.
Nevertheless, steel consumers will, no doubt, welcome the decline, which follows on from a rollover in prices for September.
Indeed, the sustained increases over the past eight months has been partly blamed for South Africa’s high producer price inflation, which jumped to 18,9% year- on-year in July from 16,8% in June.
The higher prices have also put pressure on margins at factories and mines and has added to escalation pressures in the construction and building sector.