SUPPLY AND DEMAND Prices worry steel users

Amusement parks are among customers pinched by rising steel prices.
CLEVELAND (AP) -- Soaring steel prices have been good news for an industry that's had its share of bad luck.
But as steel companies like Cleveland-based International Steel Group see profits on the rise, the bigger price tags have other industries on edge -- roller coaster manufacturers, office furniture makers and automobile companies, to name a few.
The trickle down to consumers has been minimal so far, but analysts say it's only a matter of time before consumers start paying more for cars, refrigerators and other products containing steel.
"Eventually they have to, absolutely," said Robert Crandall, a steel industry expert and senior fellow at The Brookings Institution, a research group in Washington, D.C.
"Under normal circumstances you would think that after a year or so, every $300 increase in steel prices is going to end up on the price of a car," he said.
Steel prices are rising because production is costing manufacturers more for various reasons, including a shortage of raw materials such as scrap and coke, the fuel used for blast furnaces. That shortage has resulted in an increase in the prices of raw materials, causing steel manufacturers to impose skyrocketing surcharges on companies that buy steel used in products or construction.
China buying scrap
Prices for scrap, used in most steelmaking, have risen from $120 per ton last summer to $252 a ton this month, mainly because China is buying all it can find to feed its rapidly growing steel industry. The same is true for coke.
The shortage has meant that American steelmakers lucky enough to get the raw materials are able to charge higher prices for the finished product. Still, imported steel is more expensive because of the low U.S. dollar.
A flood of cheaper foreign steel when the dollar was higher in the past contributed to a rash of bankruptcies and closings that have forced the industry to consolidate.
The average U.S. price of hot-rolled coil steel -- which is sold to car makers and others -- hit $605 a ton this month, a 68 percent surge from December's low of $360, according to steel consulting firm Meps International.
The increases already have hurt some steel buyers, including the Ohio Department of Transportation that has seen the cost of some bridge and pavement projects climb, said spokesman Brian Cunningham.
The agency is calculating how much, he said.
Amusement park ride makers also are feeling pinched by the prices.
"All of our suppliers are passing that on to us," said Jeff Novotny, president of carnival ride maker Larson International. "We're kind of at the end of the food chain there."
For example, he said, 48-inch pipe used to make observation towers have doubled in price. For now, his Plainview, Texas-based company is absorbing the extra costs and hoping steel prices will fall soon. Springville, Utah-based Intermountain Lift, a steel company that makes tracks for roller coasters, said it has had to cut jobs because orders have slowed.
"We're waiting for some to come through," company President Ray Crandall said. "I think it's [steel prices] probably going to deter future orders."
At Kennywood
Kennywood, a Pittsburgh amusement park, has noticed the rising price of steel parts used to repair rides, general manager Jerome Gibas said.
Since the park buys most of its rides from Europe, the company would have to pay higher prices to buy new attractions because of the conversion from dollars to euros. The low dollar has been a bigger issue for the company than rising American steel prices, he said.
"That's swaying a lot of our decisions about whether we'll go forward with plans for new attractions," he said.
Office furniture maker Steelcase Inc. of Grand Rapids, Mich., in late March said it would add a surcharge on its furniture to offset the $2 million to $3 million it's paid in higher-than-expected steel costs.
So far, the steel price increases haven't shown up on new car price tags and other items made by companies that are locked into lower prices thanks to long-term contracts signed with steel sellers.
But those contracts are updated every year and the price spikes are bound to make their way to American consumers, Robert Crandall said.
Gary Adams, president of the Cleveland Auto Dealers Association, predicts that the higher prices will hurt dealers and automakers before they reach consumers.