Steel firms face fallout from Corus structural price hikes

Steelwork contractors fear they could be forced out of business after Corus announced its biggest ever single price hike on structural steel sections.

Corus - which was bought by Indian firm Tata steel for £6.2bn last year - has raised base prices for structural steel by £60/t, taking the cost of simple sections beyond £1,000/t.

The increase will apply to all material dispatched from the end of next month and is likely to add to the pressure on construction inflation.

Corus blamed an increase in raw materials costs due to high global demand, particularly from Asia, adding that UK demand in 2007 was close to the peak experienced in 2004.

Dave Edwards, senior buyer at structural steelwork contractor TAAG, said the increase was as high as he could remember and likely to threaten some businesses.

He added: "If you're already working on a big job, where does that extra £50 come from? How do you absorb that? It's possible to build in some price increase, but never this much. It's the large jobs you get caught out on, which makes it a double whammy. This could send some contractors to the wall."

Corus had put an end to its quarterly price increases, but this has been replaced by less frequent and steeper hikes. Contractors say this is more difficult to manage than regular, smaller rises.

Edwards said: "A big jump like this is difficult, if not impossible, to absorb."

Another steelwork contractor, who declined to be named, said: "We had an inkling prices would go up, but not this much. It's also a surprise how soon they've come in. We thought it would be later in the year.

"The hope is that there won't be another for a while, but it's hard to tell what's round the corner."

Derek Tordoff, chairman of the British Constructional Steelwork Association, said the increase was similar to price rises in other construction products.

He said: "It needs to be seen in context as rebar and concrete has also gone up in price. Steel just seems like a bigger increase but, as less is used, it's relatively the same. Contractors should expect further increases later in the year, though not as high as this one."

A Corus spokeswoman said: "Our price increases are handled and taken at a business unit level. We simply respond to market conditions."