So, motor car manufacturers have been using the occasion of the Geneva motor show to rail against soaring steel prices. The motor industry both directly and indirectly through the component manufacturers have held the steel industry to ransom for years. The automotive sector represents a very high percentage of the market for steel products, particularly for the strip and sheet producers, and they have used their purchasing power ruthlessly to reduce selling prices on a yearly basis. It has been a common practice to force the steel and component manufacturers to cut annual contract prices every year by target percentages or face the penalty of significant loss of orders, which threatened their existence.
As a result many steel and steel component manufacturers have closed. The upstream raw material suppliers of iron ore and coking coals have had no incentive to develop new sources as returns on investment were “non-existent”. As a result exploration and development of new mining facilities stagnated. Why then does it come as a shock when we find ourselves with a shortage of these commodities?
I am amazed that there appears to be an “outcry” at the fact that steel producers for the first time in years actually appear to be making profits. In turn this has allowed the more powerful steel groups to acquire older and less well invested facilities at “bargain” prices and absorb them in to a smaller core of global steel groups, further reducing the competition and ensuring that prices stay high. If the motor giants with their teams of economists and analysts never saw this coming one wonders about their grasp of basic economics!
Sunday was “Mothers day” here in the UK and after some two hundred miles of negotiating my way through the “car-booters” and Sunday drivers; said mothers were safely delivered to our home for a dinner party. Dinner was fine and Mothers were settled in front of the TV just in time for Coronation Street leaving me with only the simple task of re-loading the dishwasher. As this offered me the chance to retrieve “that nice bottle of red” I had been hiding and sip a glass or two on my own I headed for the kitchen to feeling good. I still am not sure what happened, but somehow (I am notoriously clumsy), I managed to not only knock over the said bottle and object of my desire, but the bottles trajectory collided with an open tin of custard powder, resulting in 75cl of France’s finest and a goodly quantity of yellow vanilla flavoured dust combining to coat my shirt, trousers and the kitchen floor with a mixture yet to appear in any TV chefs recipe books. That made the price of steel seem somehow unimportant.