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Steel prices have been forecast to rise by as much as 40% this year, sending construction costs rocketing in the UK and worldwide.

The steel price rise is predicted on the back of soaring costs in two of the raw materials of the steelmaking process – iron ore and coking coal – which steelmakers will be forced to pass on to customers such as building materials producers.

Rio Tinto, the world’s second-largest mining company, has just agreed an average 85% increase in the price of iron ore, while coking coal recently tripled in price.

Analysts have consequently upgraded their predictions for steel price rises from around 20% earlier this year to as much as 40% for smaller buyers of steel.

Already last month Nippon Steel agreed a 30% price increase with automotive giant Toyota.

Pricing negotiations on iron ore under way at the world’s other largest mining company, BHP Billiton, are expected to conclude in line with Rio Tinto’s settlement.