Conflict in Ukraine causes unprecedented raw material price increase.

Conflict in Ukraine causes unprecedented raw material price increase.

The current conflict in Ukraine has been cited as one of the main reasons for an unprecedented rise in raw material costs, in particular for the foundry industry, pig iron.

Following discussion with our supplier, they have provided us with the following information which highlights the worldwide issue with raw material supply –

Russia and Ukraine pig iron production equates to 7 million tons per annum, steel billet and bloom is 21 million tonnes, 4 million tonnes of direct reduced iron/hematite and 5 million tonnes of ferrous scrap. Although only a small percentage of this is imported to the UK, with no-one else able to pick up the shortfall, the knock on effect on the world market has catastrophic consequences.

Pig iron prices have risen by 200% over the last 18 months with half of that increase occurring within the last month. All other material prices are rising sharply since the start of the Ukraine crisis, HC Chrome up 22%, LC Chrome up 49%, Silicon up 11%, Manganese up 16% and steel prices up 25%.

By March 2nd the Black Sea ports had closed with a shortfall after 3 or 4 days of 60,000 tons of pig iron. If the the Baltic ports close there will be another major issue.

Consumers are putting out enquiries for the next 12 months supply which is forcing prices even higher. No one across the globe has been holding stock, waiting for demand to increase and the prices to fall, everyone has been working hand to mouth because of the pandemic. It has been a case of minimising stock, supplying contracted customers and buying replacement stock at the absolute last possible minute hoping the price will fall but they haven’t and now the crisis in Ukraine has intensified the problem.