Steel deals for Aus farmers

14 Nov, 2012 03:00 AM
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Kerin Engineering principal David Kerin, pictured with nephew Luke Kerin.
Kerin Engineering principal David Kerin, pictured with nephew Luke Kerin.

GLOBAL iron ore prices are well down and China has big stocks of surplus steel, but back in Australia the market is unlikely to be awash with cheap steel product deals for farmers.

Metal values are generally staying relatively steady, partly because of continuing pressure from labour costs in the steel fabrication sector, particularly in areas close to mining activity.

However, the good news for rural buyers seeking fencing materials, steel tubing, sheds or metal stock yards is that the volatile global steel market is translating into some stiff competition among distributors within Australia and prices aren't likely to climb quickly.

"Our latest view is that world iron ore prices seem to have bottomed out and coking coal costs are also stronger," said Australian Steel Institute national industry development manager Ian Cairns.

"But domestic steel demand is quite subdued which creates some attractive price opportunities at times."

In September local markets were stunned by some big miners opting to scrap or delay export ore projects as prices dropped from $US110 to $US86 a tonne fuelled by fears about slowing Chinese demand for steel.

Ore markets are still down about 22 per cent on dry tonnage prices in April, but in recent weeks have lifted to around $US103/t.

"The world economy is down, which means attractive steel price prices are definitely about in certain spots, but steel makers and distributors are also fairly careful to avoid having too much supply in the market," Mr Cairns said.

"While our domestic construction market has been off the boil in the past 12 months, we certainly don't have thousands of tonnes of steel looking for a home.

"We generally foresee prices creeping up."

Sydney-based merchant Hugh Edmunds estimated the slowdown in domestic demand and price tension between importers had pushed prices down about 10pc to 15pc from highs early in the year.

"But steel producers will generally try to hold any savings they're getting from lower ore markets to help make up for a lot of super high input costs they've been absorbing in recent years," Mr Edmunds said.

His firm, Edcon Steel has four supply branches in Sydney primarily servicing the construction market, but also recently diversified into the NSW rural sector with a retail outlet in Orange.

Central NSW farm machinery maker Wade Smith wasn't holding his breath for a steel price cut from suppliers such as BlueScope or Southern Steel, despite recent BlueScope management comments about China stockpiling steel after reaching consumption capacity.

"We've actually been pretty fortunate. We've only had to adjust our prices once in 18 months because of the steel market," said Mr Smith, the general manager of Agrowplow.

"Back in 2009 we had to lift our prices every two months."

Nearby at Yeoval, Kerin Engineering principal David Kerin anticipated his steel costs may come down "a couple of per cent but nothing to get too excited about".

"Labour's a big cost for us - and we're just lucky to have good people who haven't left for jobs elsewhere."

Finding staff to work in steel fabrication was often a bigger problem than steel prices according to Tamworth-based Red River Rural principal Andrew Lynch.

"I never considered us as competitors with the mining industry, but getting people to willingly work on some of our fabrication tasks is not easy when good money is offered elsewhere," he said.

Mr Lynch said frequent labour shortages in his steel stock yard manufacturing program prompted him to start importing some pre-fabricated components.

While steel represented a hefty 60pc of input costs associated with Murray Schaefer's National Stockyard Systems business, he said wages, soaring electricity prices, and fuel costs were diluting any cheaper prices that may get passed on from steel companies.

He had, however, contained his product prices at current rates for two years.

"Chinese mills have been offering cheap deals, but we don't buy Chinese steel - we concentrate on product innovation to stay one jump ahead of imported products and imported steel," he said.

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READER COMMENTS

Ian Mott
14/11/2012 10:27:37 AM

One of the biggest impacts on rural terms of trade has been the switch from native timber fencing to steel. Wooden posts and pickets not only employ locals, they keep the money circulating in the local economy. Steel money just goes right out of the district. The irony is that wooden pickets can be milled up at half the price of steel and, with the help of an old auger bit, can be rammed just as easily as a steel picket. All it takes to get rust into a 'treated" steel picket is for it to scrape past a rock on its way down. Good wood will last longer than the wire attached to it.
bill
15/11/2012 7:00:28 AM

round here good wood costs more than steel Ian, yes it does last, but a good strainer post takes a tractor or 2 men to install, a steel strainer and quikset is a one man job.
Ian Mott
15/11/2012 10:00:23 AM

Then you should have been growing your own, Bill. I like to drag strainers around with the ute, it takes some of the sapwood off in the process. It is still a one man job with the right leverage. Add the cost of steel to your labour cost and free strainer posts allow you a lot more time to install them.
Ian Mott
19/11/2012 4:03:13 PM

I am in shock and shame. For the first time in almost two decades since I bought my portable mill, I actually bought a piece of wood. I needed one 3" x 1.5" batten to finish a job before the weekend storms and I swallowed my pride and actually paid $29.45 for a 5.4m stick at my local tradies yard. That works out at $1,912/m3. At that price a 2"x 1.5" wooden fence picket 1.8m long is still only $6.37 each. Try getting a steel picket for that price these days. Find a local with a portable and get him in for a job lot and the price will be only half again. But dry em as well.

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