Steel price boom a bust for fabricators

February 22, 2008
By: Dan Davis

Based on anecdotal evidence after talking with fabricators and some internal surveys we"ve done, fabricators are more than worried about rising steel prices. Unfortunately, every indication is that this upward trend in pricing isn"t going to disappear any time soon.

The Steel Index reported that for the week of Feb. 11-17, the price of hot-rolled coil hit a 12-month high at around $700 per short ton. That"s almost $200 above the 12-month low.

Of course, this rankles many fabricators because they remember back in 2003 when prices were much more reasonable.
For example, hot-rolled sheet was selling for less than $300 per ton back then, and now its selling close to $600 per ton. Granted, those 2003 prices were below historic averages, but since then the prices have risen to historic highs. This is a history lesson no fabricator wants to sit through.

    So what"s causing this price jump?
  • Steel exports aren"t making their way into the U.S. as often as they once did because demand is greater elsewhere. ArcelorMittal believes that 60 percent of the world demand for steel comes from developing economies. The Chinese market alone is four times larger than the U.S. steel-consuming market.

  • Without steel exports to supplement their inventories, U.S. metal service centers have to pay the high prices demanded by domestic mills. That"s left the January steel inventory tonnage for U.S. metal service centers at levels near a shortage, according to steel market analyst Michelle Applebaum. We all know what happens when demand
    outstrips supply.

  • The raw materials used to make steel have increased in prices like all other raw materials. That"s one of the main reasons that steelmakers are taking steps to own and, as a result, control their own raw material supply chains.

Industry experts don"t see any price relief in sight for the near term. Summer usually brings a relaxing of steel pricing, but the global economy has a way of making everyone rethink if and when the old rules apply to
today"s market.

On the bright side, the price of aluminum is expected to decrease. UBS analysts adjusted their 2088 price forecast for aluminum from $1.40 per pound to $1.24 per pound.

Unfortunately, a few cents fail to offset the large dollar increases for steel.

Dan Davis

Dan Davis

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8281