A Co. Monaghan engineering company had said that it has no choice but to add a 20% surcharge to current prices due to unprecedented increased costs of steel.
McAree Engineering manufactures and supplies animal-feed silos to livestock farmers, and pig and poultry producers in Britain and Ireland.
The company’s marketing manager, Peter Richardson, said that they are seeing a €540/t increase in the cost of steel for quarter two of this year, compared to quarter one.
This is an increase of up to 45% and brings the cost of mild steel towards €1,700/t.
This is largely as a result of the war in Ukraine, and also due to the huge increase in natural-gas prices, he explained.
“Over the course of 2021, the wholesale price of European natural gas increased by over 400%, setting new records.
“The costs of producing steel are at an all-time high as Russia and the Ukraine supply a large portion of the raw materials such as iron ore and coke, which fuels the furnaces.
“In addition to Russia being a large exporter of steel in its own right, the importation of it into Europe is now severely restricted,” he said.
And the outlook for quarter three is not so positive either at this moment in time, he told Agriland.
Other inputs into steel like nickel, which is used to make aluminium, galvanised and other coated steels, are also at prices never seen before, Richardson said.
“The increase in energy costs and gas in particular is also having a major impact on steel production to the extent that some steel mills are having to shut production down during peak-energy-usage times, which is affecting production by up to 10%.”
Shortage of supply
He said this is leading to a perfect storm: High inputs costs and curtailed production.
“Steel was already at an all-time high, only two-years ago steel was at €540/t. It breached the €1,200 mark at the end of last year and has continued to increase and accelerate in price since the start of the Ukrainian war,” he said.
“Along with these high prices we have been advised that there will be shortages in supply and, in particular, special steels like stainless, aluminium and galvanised, along with structural steels will be heavily affected.
“McAree Engineering has no option but to apply a steel surcharge to all existing orders for their V-Mac Silos,” he said.
This surcharge will be the region of a 20% increase on current prices, which, the company said, it very much regrets.
Annually, McAree sells about 600 silos around Ireland and the UK, but expects that to drop by 30% in 2022 as farmers are faced with rising inputs costs across the board.
As well as manufacturing silos, McAree is also one of the largest sheet-metal fabrication companies in the country.
It buys in 800t of steel per month and supplies a lot of agri-machinery companies in Ireland with various components.
“Steel is a huge component for us, but also for every bit of machinery that comes out of the country,” Richardson added.
He said Irish agri-machinery companies will certainly be feeling a squeeze in terms of what they can source and what they will have to pay for it.
“This is a huge issue for all manufacturing,” Richardson said.
“There may be a shortage of rubber, so tyres and hydraulic hoses will be impacted, as well as the actual oil to lubricate machinery parts, anything that is petrochemical-based, and lead times for machinery will be much greater too,” he said.
All of this, Richardson said, is a direct result of the war in Ukraine.
“There is a lot going on that hasn’t come to light yet because we are so early on in the war,” he said.