Corus should be 'sensible' about further price hikes

Following Corus' announcement of steel price hikes, Donal McCormack, president of the British Constructional Steelwork Association, has told CJ that he expects the company to be "sensitive and sensible" with further increases.

The steelmaker will raise the price of structural sections by £30/t in April, while large beams and columns will increase by £45/t and its 254x102mm universal beams will command an extra £40/t. An extra £10/t will be applied to all Advance S355-grade steel.

The price increases are reflected across its business, with wire rod prices rising by 8% to 10% and the price of hot-rolled products swelling by 5%.

However, McCormack believes that an overcapacity, aided by imports from China, will serve to steady the market.

"Although prices are due to rise in April, I expect this to be the peak of the current cycle," he explained. "There may be another rise towards the end of the year, but it is unlikely this will be dramatic."

Last year, steel's market share reached a record high, with its dominance in the office and multi-storey buildings markets rising to 73% and 71.8% respectively. "Being in such a strong market position, I think Tata [Corus's new owner] will be sensible with price rises and not risk losing market share to concrete," he continued.

"We cannot afford the dramatic increases we suffered in 2005, where we were all left to suffer the consequences and absorb some of the cost in order to stay competitive.

"Nobody is opposed to increases in price the real issue is proper notification of reasonable increases."

McCormack recognised that when prices increase steadily - as has been the case with concrete - the market is able to absorb the impact, but dramatic rises cause the entire industry to suffer. "The perception is that steel price has risen too sharply," he said. "But when you compare steel and concrete over the past 20 years, the percentage price rise is similar.

"I think now there will be sensible and sensitive price increases that will not affect steel's status as the material of choice."

The takeover of Corus by Tata Steel has now been officially approved. At both a Court meeting and an EGM held last week, 97% of shareholders agreed the offer of 608p per share.