The state of steel: Going up

I"m not sure how fabricators are coping with rising steel prices. I guess it"s like rising gas prices: You deal with it because it"s a fact of life.



Unfortunately, there"s little relief in sight. John Surma, U.S. Steel"s chairman and CEO, told financial analysts in April that flat-rolled steel prices could increase 50 percent in the second quarter above the $646-per-ton first-quarter price. He then added that his company would not rule out surcharge costs to cover rising raw material costs.


It"s affecting everybody. Even Toyota agreed to pay Nippon Steel and other Japanese steel producers about 30 percent more for sheet metal.



Wonder how long this can last? The steel companies know the answer, and that"s why they are trying to capture as much of a raw material supply base as they can. If they own it, they know they can have it. If left to the whimsy of world demand and an independent supply base, that may not be the case.



You might have missed this, but Nucor made an announcement late last week that is solid proof the company believes the demand for steel scrap and basic raw materials for creating pig iron will remain tight for years. The company filed paperwork to build the first greenfield pig iron facility in the U.S. in 30 years in St. James Parish, La.



Nucor reminded the press that this project may never come to fruition, but the steel company needs this to happen because it needs fuel for its network of minimills all over the U.S. With steel scrap prices at an all-time high—auto scrap reportedly goes for more than $700 per ton, 70 percent higher than in March—Nucor needs a consistent source and a consistently priced source of material to make steel. The pig iron it would create at the new mill is the answer.



Will Nucor use the blast furnace for more than pig iron? Will the minimill king make the transition to a traditional
steelmaker and use the blast furnace to start making steel the traditional way?



Nucor is spending $2 billion to $3 billion on this project. One would imagine anything is possible.



Keep in mind that German conglomerate ThyssenKrupp AG considered the St. James Parish site for its new steel mill
before deciding upon an Alabama location. There"s money to be made in the steel business. Companies likely will do what"s necessary to make the most it can.



That doesn"t bode well for a decrease in steel prices for quite a while.