The continued downturn in the global economy and the sustainability of the steel industry are among the factors which led the company to increase prices following its monthly price review. Last year was challenging for steelmakers worldwide, with companies registering record losses.

Significant increases have been experienced since June 2016 in the international prices of raw materials. The prices of iron ore and coking coal have increased by 54% and 243% respectively, which has led to an international raw material basket increase of 98%, exerting upward pressure on international steel prices. Chinese Hot Rolled Coil (HRC) has increased by 38% over the same period and Rebar by 35%. The spread between the raw material basket and that of the steel price (the gap available for conversion costs and margin), has come down to unsustainable levels from $158/t to $102/t internationally in the case of HRC. This reflects a continuation of dumping of steel by China as these are below EBITDA costs and therefore the need for safeguards.

Eoin Treacy's view

With input prices rising steel companies have no choice but to raise prices. Continues low price Chinese exports also mean this is a high risk strategy since customers have alternatives. It has been these twin threats that have contained steel producers’ shares until quite recently.

The prospect of fiscal stimulus in the USA and continued quantitative easing in Europe and Japan suggests the potential for infrastructure led global growth to pick up has improved. That could act as a salve for the fortunes of steel producers.

The VanEck vectors Steel ETF contains both iron-ore miners and steel producers. In fact Vale and Rio Tinto are its largest holdings at a combined 22% weighting. The Fund has held a progression of higher reaction lows since January and surged higher last week. Potential for some consolidation has increased but a sustained move below the trend mean would be required to question recovery potential.