Steel Prices Show No Sign of Falling

From Akron Beacon Journal

AKRON, OH — Twelve straight months of increases have more than doubled steel prices — and there’s little immediate sign that end-users in the manufacturing, construction or automotive industries will be getting a break anytime soon.

Charles Bradford, an analyst with Bradford Research/Soleil Securities Corp. in New York, predicted Monday that prices may continue to rise through the third quarter before falling at year-end.

“There are some indications that steel users have been building up some inventories,” which is usually the first sign of a slowdown in prices, he said, but “no one has excessive inventories” and demand continues to be strong.

Midwest producers, who saw hot-rolled steel sell for as little as $210 a ton in late 2001, were getting $646 for a ton on the spot market in late July, according to Purchasing magazine.

Bradford cited the continued high price of raw materials, particularly scrap, along with transportation disruptions and production problems as the chief reasons why steel prices aren’t falling as they often do at this time of year.

A shortage of rail cars to move coke, one of the basic raw materials in making steel, and a higher-than-usual number of scheduled outages for maintenance have contributed to the rising prices.

U.S. Steel Co., the nation’s largest steel maker, has scheduled three production shutdowns to reline blast furnaces, Bradford said. Typically, one or two relinings would be scheduled.

But with steel makers finally returning to profitability over the past few months, “now that they’ve got cash… now’s the time to catch up” on maintenance, Bradford said.

The massive reorganization that left the industry with fewer players also has played a role in propping up what were unsustainably low prices.

Price volatility at nearly every step of the process — from the cost of raw supplies to the price of a ton of finished steel — has left players scrambling to keep up.

Take John Eslich, the vice president of Eslich Wrecking Co. in Nimishillen Township in Stark County, Ohio.

The higher scrap prices that are pushing up the cost of steel are making his business more difficult to manage.

The higher prices for scrap ferrous metals mean he can charge less to customers who want buildings or other structures demolished.

The problem, though, is that scrap prices are so erratic that Eslich can’t get dealers to give him quotes that are good beyond two weeks. Typically, he said, he’s been able to rely on dealer quotes being good for a month and could calculate demolition costs accordingly.

“We’ve really never encountered that much (volatility) in our history,” he said of the company founded by his father, Richard, in the late 1950s.

At the other end of the spectrum is John Young, president of Ohio Steel Structures LLC. Young and two partners formed the company in early January after buying the closed Burger Structural Steel Co.

He said mills and warehouses are changing prices on a monthly basis — and some are charging based on conditions at time of delivery.

“The price might be something today in August,” Young said, “but something else in September or October.

“We don’t know what that something else is.”

For projects under contract, he said, “a few of the owners have understood our situation and given us some relief.”

In other cases, the added costs can’t be passed along to customers, Young said.

Still, he’s getting new projects, Young said.

“I see a lot of projects still coming out,” he said, and hasn’t seen designers reverting to other forms of construction to avoid higher steel costs.

“Surprisingly enough, no, I haven’t seen a fall-off in construction,” he said, possibly because “a lot of people have been waiting for the last couple of years to build.”

At Canton-based Timken Co., the steel division has been running at full capacity for most of the year, spokesman Jason Saragian said.

The division has been operating on overtime since at least the beginning of the year, Saragian said, and 60 workers were transferred from the company’s bearings complex to the steel plants.

“Our order book continues to look strong,” Saragian said.

He said demand has been strong, particularly in the light-vehicle automotive market, on-highway heavy truck and energy sectors.

The company has put in place a surcharge mechanism to allow it to recoup much of the added price of raw materials.

“The supply of steel is of greater concern than price” to some customers, Saragian said.

Timken isn’t the only steel maker beefing up employment to meet demand.

International Steel Group Inc. (ISG) in Richfield, Ohio, announced Thursday that it was expanding its Cleveland Works mill to accommodate high demand from automotive customers and would recall 50 workers.

The Associated Press reported that ISG plans to spend $40 million to add a hot dip galvanizing line at the portion of Cleveland Works located in Cuyahoga Heights, Ohio. The line will be used to make high-quality steel for auto manufacturers.

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