UK metal suppliers have predicted that aluminium and steel demand will continue to drop throughout 2023, following a 10% drop in aluminium since January
Due to the war in Ukraine, the pricing of aluminium and steel peaked last spring. Since then, weak demand has led to stockholders dropping their pricing to reduce excess inventory.
This is despite higher production costs on the supply side due to an increase in energy costs.
In April 2023, the cost of materials used in construction rose to an average of 4.7%. This was due to declining product availability.
Despite this trend, the price of steel fell by 31% between spring 2022 and January 2023.
The overall fall in demand for aluminium and steel is weak, and the cheap steel import supply surge from Asia into Europe is driving low prices across the continent.
Paul McFadyen, chairman at metals4U, predicts price deflation and low demand to continue in 2023: “Weak demand is currently winning, leading to price deflation in the UK metal market. Low demand is likely to continue, forcing businesses to slow down production for the remainder of the year as they can’t risk being stuck with excess inventory.”
1. Uncertain global conditions will keep prices low
The UK economy has demonstrated good resilience in the early part of 2023.
However, with ongoing general high inflation, high energy costs, interest rates rising, and uncertain global conditions, the outlook for UK metal demand is set to remain challenging.
2. High production costs and weak UK demand means price deflation is likely to continue
Mild steel, aluminium, and stainless steel are commodities with prices strongly influenced by the balance between supply and demand.
There has been an ongoing battle over the last 12 months between high production costs on the supply side and weak UK demand.
3. Ongoing geopolitical tensions and economic turmoil driving market unpredictability
Covid-19, the war in Ukraine, and earthquakes in Turkey have already caused unprecedented disruptions to supply chains in the metal industry.
