Steel prices rise as supply drops

Increased steel costs can lead to higher prices for consumer goods.

MILWAUKEE JOURNAL SENTINEL

MILWAUKEE — Steel prices are rising as global supplies tighten and less foreign steel finds its way to the United States.

Most of the major U.S. steel mills have announced price increases that will go into effect this fall, according to industry analysts. Some of the increases are only about 3 percent, but it’s the first time that prices have risen in months.

Steel is the main ingredient for a plethora of manufacturers, from automakers to washing machine companies. Increased steel costs can translate into higher prices for consumers or cause people to delay purchases until prices come down.

“Right now, we are just getting letters from steel suppliers talking about price increases,” said Gary Wenzel, president of Capital Stamping Corp., a Milwaukee manufacturer of specialty metal stampings.

“These are not as significant as the price increases we saw in 2004 ... but the question is whether more are coming,” he said.

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 percent in 2008. The mills are expected to pass on higher raw material costs by raising their prices for finished products.

A look at numbers

Steel imports into the United States rose slightly in July but were still down 22 percent from a year earlier, according to the Precision Metalforming Association.

Imports of hot-rolled steel, used by many U.S. manufacturers, declined 9 percent in July and were down 45 percent for the year.

China, a net exporter of steel in 2006, has reduced the amount of material it sends to the United States.

Imported flat-steel from China has fallen 25 percent so far this year and is expected to decrease further, said Bill Gaskin, president of the Precision Metalforming Association.

“Metal-forming companies in the U.S. have been impacted by China as much, if not more, than any steel-related industry in the United States,” Gaskin said.

“Flat-rolled steel can be up to 70 percent of the production cost for metal-forming companies, and it is typically more than 40 percent of our cost. Availability, quality and cost of steel is a major factor in our competitiveness in the global market. The simple fact is that the U.S. has, and will continue to be, an importer of steel to satisfy customer demand. Imports provide specialty steel that’s not readily available from domestic sources, and they provide needed competition in the U.S. market.”

U.S. steel supplies are adequate now, partly because the automotive and housing markets are depressed and don’t need as much raw material.

“We will see whether the steel producers can make their price increases stick,” Gaskin said.