Steel Prices on the Rise

March 12, 2004 - 11:10

Chinese steel producers have been scouring the world for scrap steel, causing scrap prices in the United States, the world’s largest supplier, to rise by as much as 80 percent.

Chinese steel producers have been scouring the world for scrap steel, causing scrap prices in the United States, the world’s largest supplier, to rise by as much as 80 percent, and this is causing greenhouse manufacturers a number of problems for building new houses. Chinese steel consumption rose 30 percent in 2003, reaching 250 million metric tons, accounting for one-third of the world output of rolled steel. Prices are rising for number of reasons, most notably because of China’s demand for steel to build the infrastructure for the Beijing Summer Olympics in 2008.

According to an article in Industry Week, United States steel producers say the rise in prices reflects higher raw materials and transportation costs and a recovery in their industry, which started a rapid decline in 2001 following a surge of cheaper imports and an implosion of pension and retiree health-care costs. Furthermore, a weaker U.S. dollar means imported steel that was once a cheaper alternative is now selling at a much higher price. In fact, U.S. import prices on many steel products had risen about $100 per short ton in late February. Prices have not been this high in the United States since the 1970s.

"We can expect several steel price increases over the summer, along with fan, poly and other increases," stated Park Pittman, Nexus Corporation’s Great Lake sales manager from Eaton, Ohio. "This even comes into play for items such as galvanized conduit for electrical lines in the garden centers, etc. I’ve heard of about as much as a 25 percent increase in galvanized steel conduit by late summer."

Steel customers expected prices to fall after tariffs imposed by President Bush to protect domestic steel makers were lifted. The tariffs buoyed average steel prices by as much as 30 percent. However, instead of easing after the tariff, steel prices have climbed 30 to 50 percent, and as much as 100 percent for some specialty products, according to Star Tribune national economics correspondent Mike Myers.

The main problem that this is causing greenhouse industry, according to Pittman, is that manufacturers have to pass on the higher cost to the customer. "Unfortunately, garden centers and growers can’t expect to get more money for their plant material when or just because the price of steel goes up."

Several sources in the greenhouse industry have mentioned that they work with manufacturers in the United Kingdom that are having a difficult time finding and buying pre-galvanized pipe, so they are trying to work with Canadian manufacturers since they tend to have an advantage with their weak dollar.

No one knows how long this situation will last, but John Mothersole, senior economist for Global Insights in Boston, predicted that steel prices might not ebb until the second half of 2004 or early 2005. He predicts that higher prices will coax steel suppliers around the world to boost production. However, until then, most increases have already been announced for March and April. Industry reports show steel users doubling or tripling their orders to avert paying even more in months to come. Unfortunately, this only serves to reduce steel supplies and reinforce higher prices.

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