Rising steel prices affect farmers globally

Stronga have seen steel price rises from our stockholders of around 50% during April 2010, and our suppliers have indicated further substantial increases in the pipeline. The agricultural machinery industry is dependent on the metal, which is extensively used in the construction of agricultural equipment and machinery.

The price hike is due to steelmakers being forced to absorb the increased cost of raw materials. Prices of iron ore, coke, steel scrap, seaway freight and energy costs are all on the rise, putting steel mills under huge pressure.

The world’s steelmakers are opposing price increases for iron ore and coal, after moves by leading mining groups to switch to short-term contracts. Industry officials globally are expressing concerns about iron ore suppliers’ move to drop a 40-year-old annual pricing mechanism in favour of shorter-term deals based on the spot market.

During the second quarter of 2010 prices are expected to continue to rise. A further rise in the price of steel will transfer the pressures of increased costs from steelmakers to the downstream industries, including agricultural manufacturing. The direct effect of these increases is that selling prices of all agricultural machinery are likely to increase rapidly. The concern is that this may have an effect on agricultural equipment demand, as there is a limit to what customers are prepared to pay at a time where agricultural commodity prices remain low.

Experts have also warned that more steel price rises are on the way and say now is the time for clients to act to secure advantageous prices. In addition to the increased prices we are seeing shortages of some steel sizes in the market, which are making it harder to plan lead times. Our advice to our customers would be to order early as lead times and prices are generally increasing.

For more advice on planning your next purchase don’t hesitate to call Stronga on +44 (0)1992 519000 or email info@stronga.co.uk

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