Due to the soaring iron ore and coking coal prices, global steel mills are facing their costs being more than doubled, bringing the downstream steel users serious pressure from the high steel prices. Therefore, most developing countries have started to consider measures for controlling the rising steel prices to avoid the inflationary pressure and other possible problems. Besides, because the all other construction material prices have escalated a lot this year, operating costs for the construction industry have increased, and finally causing some construction projects to be delayed or even halted. Therefore, governments in several countries have begun to undertake actions to avoid unreasonable steel prices.
In South Korea, the government will punish those manufacturers or distributors who have stocked up on some levels of rebar and scrap. On the other hand, in a bid to control the unusual rising raw material prices, the government has canceled a 3 percent import tax from ferro-silicon. This policy might change South Korea’s ferro-silicon import pattern, and China may seize this chance to export more ferro-silicon to the Korean market than it did before.
The rising raw material price situation has also taken place in Vietnam. The government of Vietnam has requested the Vietnam Ministry of Industry and Trade to cooperate with its financial department to enlarge its supervision in steel trading, which includes the supervising improvement, arresting work shoddiness and stopping illegal iron ore exports. The government also requested Vietnam Steel Corporation (VSC) to increase its steel capacity to meet the domestic demand and restrain the rising steel prices.
With the soaring steel prices in the global steel market and the shortage of the Indian steel supply quantity in matching the domestic demand, the steel price has already risen by 24 percent in India this year. Therefore, India’s Ministry of Steel said that they are now keeping their eye on the steel price. Once the steel price level has risen above the processing cost, India’s Ministry of Steel will immediately undertake some measures. India’s Ministry of Steel has also suggested that the government to set up the mechanism for supervising the steel price. Consequently, Tata Steel, Steel Authority of India Limited and the Jindal Group have all announced that they are not going to raise the steel price during the following two to three months.
The rising steel price has also affected Taiwan’s construction Industry; contractors have requested the government to ban the rebar and billet exports. The Ministry of Economic Affairs finally agreed to stop the rebar and billet exports as of February.
Not only Taiwan, but some Middle Eastern countries are also facing the same situation in their infrastructure and construction projects. The U.A.E. has decided to cancel all of the import duties on steel products to support the real estate market and the construction industry. A steel trader said that to cancel the import tax on rebar would help to relieve the pressure on contractors from the high material cost and to permit the completion of construction projects by maintaining stable steel prices in the market.
In Jordan, the steel price in March had risen by 63 percent since the end of 2007. Jordan’s government has reduced the steel import duty by about US$70/ton to relieve end users’ pressure. Also, Oman’s Ministry of Commerce and Industry has requested that steel suppliers provide the allocation list to traders periodically and they will check if those traders have sold those steel products to the consumers directly or have kept them in stock to wait for higher selling prices. Oman’s government also requested the steel supplier to increase the allocation to their consumers and lower their profits obtained from general users.
Basically, for most of the developing countries, their governments will still be able to control their steel market price because of the uncompleted financial system; however, for those developed countries, such as Europe and USA, their governments are unable to control their steel market price and the customs policy will not affect global steel demand.
In one hand, the strong steel demand comes from the developing countries’ infrastructure needs which keep the global steel demand at the current high level; on the other hand, the high raw material price of iron ore and coking coal has increased steel manufacturers cost a lot. These factors will finally cause the end users to pay more and more when buying steel products. This situation may cause a vicious cycle and finally cause the steel price to crash.
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