Sheffield based consultants, MEPS in their monthly round-up on prices say increasing raw material costs are pushing steel prices up rather than an increase in demand for steel.

The US has been experiencing sustained upward momentum for flat product prices but transaction values may be nearing their peak. Supply limitations, partly due to mill capacity cuts, supplemented by scrap shortages and the surging costs of other raw materials, have pushed prices up rapidly in recent months. However, real demand has not improved significantly enough to support such massive increases and customers are now questioning how long these levels can be maintained.

In China, after the extended New Year celebrations, prices have resumed their sharp upward trend. Recently, however, they have come under negative pressure as it became clear that activity was soft. Nevertheless, a number of leading producers have elected to lift their official March ex-works figures as they strive to pass on their higher costs for iron ore and coking coal.

In Japan, demand for flat products is firm. Steelmakers claim surging outlay on raw materials, have implemented further price hikes. For the moment, distributors are recouping the rises from their customers.

In South Korea, subdued sale volumes are making it difficult for the mills to implement increases. Posco is reluctant to try to recover growing raw material costs by means of domestic hikes in period one.

In western Europe, buyers are anticipating more increases in the second quarter as the mills make some upward adjustments in line with the positive momentum in raw materials. Rolling schedules are currently full because of the restocking exercise that started in December ahead of price rises. Third country offers are still not competitive but may start to look more attractive if the proposed hikes are maintained.