Steel Prices Expected to Increase in 2008; Consumers Could See Higher Costs Passed On
Posted on: Tuesday, 1 January 2008, 15:00 CST
By RICK BARRETT
The new year might usher in higher steel prices as global supplies tighten and overseas demand remains strong, which could pinch consumers.
Steel is the main component for many manufacturers, from automakers to washing-machine companies. Increased steel costs can translate into higher prices for manufacturing companies and, ultimately, consumers.
AK Steel Corp., based in Ohio, recently said it would add a $230- per-ton surcharge to electrical steel product orders shipped in January.
The steel producer said the surcharge was based on raw material prices and the cost of energy used to make its products.
Most of the major U.S. steel mills announced price increases that went into effect last fall. Some of the increases were only about 3%, but it was the first time that prices had gone up in several months.
Currently, some steel suppliers are limiting price quotes to about three months. They aren't sure what the prices will be after that, according to area companies that buy large amounts of steel.
"That's the biggest wild card for manufacturers in 2008. People just don't know what steel prices are going to do," said Glen Tellock, president and CEO of Manitowoc Co. and chairman of the Association of Equipment Manufacturers, a Milwaukee-based trade group.
Emerging industrial countries, such as China and India, have complicated global steel markets and have made them harder to predict.
"The people who are going to do the best are the ones who can react to the changes the fastest," Tellock added.
Higher costs passed on
Lehman Brothers analysts have said strong worldwide demand for iron ore, which is used to make steel, will drive steel-making costs up as much as 25% in 2008.
The mills are expected to pass on higher raw material costs by raising their prices for finished products.
Last week, Moody's Investors Service said strong global demand for steel has supported prices in every region throughout the world, with China consuming tremendous amounts of material as well as producing it.
"Demand in the U.S. has also remained solid, despite weakness in the appliance and automotive markets," Moody's analyst Carol Cowan wrote in a note to clients.
Under pressure from the United States and Europe, China recently said it would place export tariffs on more steel products, effective today.
China's recent decision to place an export tax on raw steel, while welcomed by U.S. steel producers, sent a chilling message to U.S. manufacturers that rely on at least some imported raw material.
Decline worrisome
A continuing decline in steel imports is worrisome, according to the Precision Metalforming Association, a Cleveland-based trade group with a chapter in Wisconsin.
For the first 11 months of 2007, imports of hot-rolled steel, the product used most frequently by metal-forming companies, were down almost 50% compared with the same period in 2006, according to the PMA.
A combination of forces, including fewer imports, could push steel prices higher in 2008. That threatens to harm U.S. manufacturers competing with companies in Asian countries, said Bill Gaskin, PMA president.
Some material prices have remained stubbornly high even without price increases, according to local manufacturers.
"The price of chrome has skyrocketed. When we have to chrome- plate our parts, the costs are way up there," said Ron Loos, president of Quality Tool & Die Inc. in West Allis.
Carbide prices also remain high, Loos said, adding that carbide inserts previously costing $10 now cost $14 or $15 each.
Some purchasing managers say their steel suppliers have told them to expect price increases in 2008.
Companies such as General MetalWorks Corp. of Mequon say they haven't received notices of price increases or surcharges yet, but they're not getting long-term price quotes from steel suppliers, either.
"It's interesting that our suppliers were only willing to commit prices for the first quarter" of 2008," said Eric Isbister, General MetalWorks chief executive officer.
Copyright 2008, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)
(c) 2008 Milwaukee Journal Sentinel. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Milwaukee Journal Sentinel
 |
 |
User Comments (0)
RSS Feeds