Steel deals for Aus farmers

Steel deals for Aus farmers


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Kerin Engineering principal David Kerin, pictured with nephew Luke Kerin.

Kerin Engineering principal David Kerin, pictured with nephew Luke Kerin.

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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.

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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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