The increasing prices of steel are having carry-over consequences to other industries, but metal prices are themselves subject to a few factors.
First and foremost, iron ore prices have gone up. Iron is a metal itself, but being a base ingredient of steel, price hikes in this material means steel prices are also going to rise.
The main reason for increased prices of iron ore has to do with supply and demand, especially demand from developing Asian countries such as China, who need iron ore to make steel for construction and manufacturing purposes. Increased demand allows iron ore providers such as BHP and Rio Tinto to raise prices.
Secondly, coking fuel, which is used in making steel, has also become more expensive. Again, the main driver of this price increase has to do with the Asian demand for steel. Additionally, flooding in Australian coking coal producing regions in January and February resulted in a stock shortage.
A third, more subtle reason has to do with rising costs of sulphuric acid. This substance is used in fertilisers, for refining water and oil, in mining to extract copper, nickel and uranium, and yes, in steel production.
China used to be the main exporter of sulphuric acid, until internal consumption forced it to not only reserve more of the acid for its own use, but to also import the chemical. As a result, there is a global shortage of the mineral acid.
This in turn has carry-over consequences for the processes it is used in, including steel production, and supplies of copper and nickel.
The price rises are not restricted to steel and iron. Recent news trends indicate copper prices are also on the rise, resulting in a roaring scrap trade. Insufficient stocks of sulphuric acid could be a contributor to this phenomenon. Although smelting operations produce amounts of sulphuric acid as a by-product, this is insufficient, and extra supplies are needed.
A reversed application of supply and demand is also working against the availability of the acid. Prior to 2007, sulphuric acid prices had stagnated, and many production facilities closed down because of the market conditions. Most acid producers focused on maintenance as opposed to expansion.
Now the demand is outstripping supply, and the prices of this little-known commodity is rising to record levels, pulling up a vast range of industries with it.