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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: yard_man who wrote (6036)1/23/2004 5:48:39 PM
From: mishedlo  Read Replies (2) of 110194
 
From Harmy on my board on Steel Prices

This is going to develop into a real witches brew as the scenario of higher commodity prices plays out.
The reason for higher steel prices rests on the 20% increase in ore price owing to the fall in the USD. Coking coal has also risen by the same amount for the same reason. Shipping costs have also risen three or four fold and also add to the cost - and the GM twerp is complaining about the price increase.

Protectionist policies have allowed US steelmakers to remain complacent and to not upgrade their steel mills. Had they done so they would have been able to take advantage of the latest technology which uses PCI (pulverised coal injection) and which uses far cheaper thermal coal which would have kept costs down. Far from using imported high cost coking coal the US steelmakers could have used indigenous US thermal coal situated right on their doorstep had they modernised their plants.

When you add to the higher basic cost of steel, which will feed through to most manufactured products in the US, you also have to add the additional higher fuel costs associated with the dollars fall. You produce steel based items at a higher cost which then have another added cost of the fuel to get the product to the destination. Each step in the process has a multiplier effect which hasn't even begun to play itself out.
All these added costs will deduct from the ability of the US to make US exports competitive. There's a long, long road ahead I think.

Regards
Harmy
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