Steel Prices Continue to Soar

Jason Sandefur

Demand for raw material from China has driven up the price of rolled steel by 57% to $617 in June from $350 in January, according to World Market Research Centre.
Analysts predict inflated market conditions through at least 2005.\
China Steel Corp. announced price hikes for the third quarter of 2004, driving steel costs even higher for fastener manufacturers. CSC raised steel export prices by $10 to $30 per metric ton, including a $20 to $25 per ton increase for steel exported to China, Taiwan Economic News reported. China consumes about half of all CSC exports.
CSC will enforce different price increases on products for different markets. For instance, the Southeast Asian market will see higher price hikes than others because it experienced smaller increases in the second quarter of 2004.
CSC delivered 810,000 metric tons of steel products in June, the same as the previous month. Monthly revenue will total NT$13 billion (US$385.75 million), while earnings top NT$5 billion.
Taiwan-based CSC reported a broad rise in prices for wire rod, electrical sheets and cold rolled steel coils. Hot rolled products are approaching about $550 per metric ton, while cold rolled items are reaching about $630 per metric ton.
Other Taiwan steel producers reported a strong performance in June, as steel price and output rose dramatically. The price hikes prompted some Taiwan steel consumers to seek new steel sources in order to reduce production costs. Some firms have begun importing cheaper steel from Russia and Ukraine.
Price Hikes Take Heavy Toll on Auto Suppliers
Ballooning steel prices are hit steel consumers hard. The Associated Press reports that some auto suppliers have had their already thin profit margins cut in half by global steel price hikes, forcing many to trim their workforce to survive.
Some supplier industry representatives are urging the White House to force price reductions on the steel industry to avoid further offshore sourcing, AP reports.
Jim Zawacki, owner of GR Spring & Stamping in Grand Rapids, told AP the time for the administration to act is now.
“Steel is just another excuse for our customers to go offshore,” he stated.
Other suppliers have started researching steel substitutes for many auto components in an attempt to reduce their dependence on steel.
Barring a breakthrough in prices, some small and medium-size suppliers could face bankruptcy in the near future, according to industry analysts.
“We will see multiple bankruptcies of suppliers within the next 90 days,” noted steel analyst Craig Fitzgerald.
Automakers Set Up Resale Programs
To ensure that parts suppliers have access to steel, the Big Three have set up steel resale programs to buy steel in bulk and sell it to suppliers at a fixed rate. Nearly half of all direct auto suppliers expect some sort of relief from the carmakers. But suppliers note the remedy is not generally available to smaller firms.
General Motors has placed some suppliers on its scrap resale program, selling steel to suppliers at below-market rates.
“That”s one way to get a fixed price on a raw material,” said Tom Hill, communications manager for GM.
Many suppliers avoided resale programs in the 1990s because steel prices dropped to historical lows.
Pressure is on domestic suppliers to match China”s component prices or lose business. The Big Three automakers have signaled their intent to purchase cheaper Chinese parts if American suppliers fail to limit price increases. �2004 FastenerNews.com