ENGLAND: Steel boss James Brand raises his voice above the roar of metal being funnelled into a foundry furnace as he details how rampant costs have pushed him to raise his prices by 70%.
Yet he says that, despite this hefty hike, his customers in sectors including oil and gas, autos and construction are placing new orders at a record-breaking gallop. His order book has ballooned from the usual 4-6 weeks to 6 months.
Those clients anticipate further price rises at a time when the cost of pig iron and scrap metal is going through the roof, fuelled by the Ukraine war, and the vast amount of energy needed to melt the two inputs into cast iron has never been more expensive.
"With raw materials and costs escalating, customers are thinking, 'If I don't buy now, in two months it will be even more expensive''', Brand said amid the heat, dust and hubbub of United Cast Bar's (UCB) factory in a part of northern England that once powered the Industrial Revolution.
"People are placing orders ahead, to try and fix as many costs as they can."
Having once struggled to increase prices at all, UCB is now reviewing them every month and gradually marking them up, extra costs that will seep into global production lines, further stoking inflation and a consumer cost-of-living crisis.
Yet Brand said despite the price rises, the pressures were still building on the business. Without giving full financial details, he said UCB's gross margin had dropped by about 6%.
Similar problems are being felt by steelmakers and other industrial companies across Europe. They're caused by rocketing power prices, driven by a supply squeeze, as well as ongoing Covid disruption and Russia's invasion of Ukraine — two countries that are both major producers of pig iron.
The situation is particularly acute in Britain, though. The steel industry there faces electricity prices that are 50-60% above those faced by peers in Germany and France due to environmental policies, a reliance on gas, as well as power transmission and carbon permit costs above those in Europe.
This spells trouble for companies like UCB, which devours power for its two 8-tonne electric-induction furnaces, which reach over 1,400 degrees Celsius to melt the scrap and pig iron, before the molten metal is poured into a receiver to cast into the desired shape and cool, ready to go to Europe, the Americas, Australia, New Zealand or within Britain.
Each year that process requires 24 gigawatt hours of electricity and up to 22 gigawatt hours of gas, putting the company among the intensive power users in the country.
Normally, UCB's energy bill would be around 250,000 pounds ($326,000) a month, said Brand. In March it hit 450,000 pounds.
"It's a hefty bill'', added Brand, the fourth generation of his family to work in the metals and steel industry, from the site in Chesterfield, a town in the orbit of the northern English city of Sheffield, historically famed for its steel. "It's even worse at the moment." — Reuters
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