A tumultuous 18 months has led to an unprecedented rise in steel prices. Supply has been unable to keep pace with the slumps and surges in demand for steel, resulting in the continual cost increase.
With this instability set to continue for the foreseeable, what can steel manufacturers do to protect margins and optimise profits?
Here, we give you the solution.
How much have steel prices increased?
Over the past 12 months, the price per tonne of steel has increased by
- July: +£30
- August: +£30
- November: +£40
- December: +£80
- January: +£50
- March: +£30
- May: +£50
- May: +£100
- June: +£80
Why have steel prices increased?
Covid-19 had a significant impact on demand and supply. The construction industry was hit hard by the pandemic; projects had to be ceased, supply chains were disrupted and demand decreased. The drop in demand for work directly affected the demand for steel. This crash meant the closing of steel mills and reduced output.
But with restrictions beginning to ease, demand swiftly surged. So swift that supply is struggling to keep up. The availability of steel has taken a hit and with shortages comes increase in cost.
Rising cost of raw material
As one of the key components in steel production, the cost of iron ore impacts the price of steel. And iron ore reached record highs this year. China is the world’s largest consumer of iron ore and this price spike comes as the result of supply being unable to keep up.
Rising cost of scrap
Scrap materials also saw price increases. Scrap supply in the UK tightened, resulting from reduced car production, steady demand continuing from traditional destinations such as Turkey, and US demand being unusually high. With this supply constraint, came the driving up of prices.
As the repercussions of Covid continue and the UK navigates its new relationship with the EU, it looks like the volatile steel prices are set to stay.So, the question is, what can you do to stay ahead of the game and safeguard your margins during such instability and uncertainty?
Change your approach to pricing.
Why are conventional pricing strategies a problem?
The pricing strategies conventionally used in the industry are reactive, with updating prices being a manual process. This can lead to overly-broad pricing, leaving negotiations up to the sales team. What’s more, with a volatile market, this labour-intensive process isn’t effective. You’ll have spent so much time completing each step, that when it’s finally done, you’ll have to start all over since the market has changed yet again.
Research has found that the unseen annual margin loss of B2B businesses without dynamic pricing strategies can be up to 6.58%.
How can you implement dynamic pricing?
Dynamic pricing can be achieved by using specialist software that provides an end-to-end solution for managing your business.
Our Prof.IT software is a reliable, user-friendly, cost-effective ERP system designed specifically for the steel industry.
And one of it’s key features is dynamic pricing.
Prof.IT gives you more control over your sales team, enables you to easily align with market prices and ensures you’re always selling at the right price.
- Create your own pricing structures based on customer, market/sector, product/SKU, product class, seasons and quantity brackets, or a combination of all of them.
- Create your own base price or user average batch costs.
- Create flat costs throughout your product classes by controlling the costs displayed to your sales team, ensuring that good purchases are not sold under the current market value.
- Manage your margins by introducing checks on orders, ensuring that you’re making a minimum value or margin.
Respond to the uncertainty of the market by regaining control of your pricing. If you want to find out more about our industry specific Prof.IT software, give us a call on 0114 201 2200 or send us an email on firstname.lastname@example.org to speak to one of our specialists.