Steel prices across the world are rapidly rising due to a combination of factors including higher consumption in China and increasing prices of raw materials and energy.

A report published by RNCOS entitled “China Steel Industry Analysis (2006)” concluded that China leads the world as the largest steel nation for supply as well as demand. Spiraling consumption stemming from economic growth has fuelled the domestic demand. Sectors consuming the most steel in China are construction, machinery and automotives. Cheap production base is also a prime factor leading to growth in steel consumption. By 2010, China’s domestic steel production is expected to reach its apex

The high demand in the world steel market, particularly in China, leads to deficit. Suppliers take advantage with higher prices citing high prices of ironstone. However in China the rise in steel price was due to price rise in raw materials. The larger producers are secure with big orders on export supplies of flat sections with the market-experiencing deficit, as reported by Gazeta.KZ  news.

Global demand has a major role to play in this scenario. Due to the increase in income and industrial capacity in China and other Asian nations, there is a similar impact on the demand for products and inputs including cars, tractors, refrigerators, combines and other consumer products for the production of which, steel is integral, resulting in increase. The result is application of pressure on the prices of raw and scrap steel.

Another major factor relates to the considerable rise in the energy costs involved in the process of steel production. Escalating prices of oil and natural gas are taking a toll on the price of steel production as well. The price for the production of raw steel is much higher on account of higher energy prices.

Among other reasons given by steel producers for higher prices and surcharges include the devaluation of the US dollar, China’s consumption frenzy, spiraling prices of steel scrap and other raw materials. China ruled the roost in 2006 as the largest single market and the strongest growth area, with expectations for 13% rise in steel usage in 2007 and an additional 10% in 2008, adding up to a total of 443 million tons or 35% of the global total.

Thanks to the solid demand for steel, producers could hike prices of hot-rolled coil steel, to be processed into cold-rolled steel for use in the manufacture of automobiles and electrical appliances.