United Kingdom

Since my previous Mirror report, we have seen an unprecedented rise in both prices and activity levels for finished and secondary materials, mainly as a result of the events unfolding within Ukraine. Following this sustained period of whole-market activity, the market is now seemingly enduring a period of correction.

Following on from the Ramadan holiday period (during which Turkish mills bought very little fresh material, citing poorer pricing on finished products along with lower-priced billets emerging from Russia), the ferrous market now sits in a somewhat static state, waiting for the Turkish steel mills and recycled metal suppliers to agree new terms and conclude further cargoes, thus establishing workable trading conditions for buyers and sellers alike. The issues for all are finished product pricing, material stockpiles and a willingness to supply recycled metal at a reduced rate alongside rising production costs for all participants.

With the current index on HMS 1&2 80:20 falling by US$ 125 and lower finished product prices, new trading levels will need to be established, although currently it would seem there has been a slight overreaction on the recycled metal supply pricing. Nevertheless, this has opened up possibilities for a resumption of the container market for UK suppliers as Asian consumers are attracted to the lower price bands with which they were previously unable or unwilling to compete, mainly due to freight rate differentials that existed between the various market destinations. Coupled with a more attractive dollar exchange rate, this has led to more container contracts from the UK being concluded for May shipment than has been seen over recent weeks.

UK steel mills have raised their finished product prices by 25% solely in response to the higher energy costs prevailing at present. Coupled with higher diesel costs for many UK industries, including recyclers (basically, the cost has doubled as far as international fuel pricing is concerned, but has trebled here owing to the introduction of UK taxation on fuel for plant and machinery operations), this is impacting the whole supply chain and beyond.

Latest official figures put UK inflation at 7% - up by 1.6 percentage points since my previous report in February. With expectations of even higher inflation to come, the sector is facing unprecedented, increasing operational costs, with fuel, labour, parts, repairs and taxation all taking a bigger slice out of margins.

On the other hand, the price increase seen in recent weeks has improved the flow of material into recycling plants.