Steel Prices Are Likely to Jump, Adding to Manufacturers' Woes [WSJ]
By PAUL GLADER
May 24, 2006; Page A2
Steel prices, which had been expected to taper off in the second half of the year, are now expected to rise nearly 19% from current levels in the third and fourth quarters to offset rising iron-ore costs.
The increase could put extra cost pressure on manufacturers contending with rising energy and commodities prices.
Some analysts ratcheted up forecasts for steel prices following 19% increases in prices for iron ore, a steelmaking ingredient, from the world's three largest iron-ore exporters -- London's Rio Tinto PLC, Brazil's Companhia Vale do Rio Doce and Australia's BHP Billiton Ltd., which control 75% of iron ore shipped abroad. The three have negotiated price increases with major European and Asian steelmakers in recent days.
"It is just further global pressure on prices. Right now, you have a fairly tight global market," said Chicago steel-industry consultant Michelle Applebaum.
Moreover, steelmakers say demand from the construction and automotive markets is expected to be stronger in the second half than some had expected.
"This makes the argument more compelling that steel prices in 2006 are going to be trending up rather than trending down," said Tony Taccone, a steel consultant with First River of Pittsburgh.
Some analysts believe steelmakers could increase prices by about $100 a ton, or about 19%, for some products, potentially surpassing record steel price levels in 2004. The world's average price for hot-rolled coil -- used to make auto parts and home appliances -- is at about $550 per metric ton this month, according to World Steel Dynamics, a research firm in Englewood Cliffs, N.J. The global price peaked at about $630 per metric ton in September 2004.
Though the revised steel-price forecast matches the 19% rise in iron-ore prices, the two don't necessarily move in tandem. Ms. Applebaum said the expected price increase this year, in part, represents spillover from a decline in steel prices last year despite a 72% rise in iron-ore prices.
Some steelmakers, mainly those in North America and parts of Eastern Europe, own iron-ore mines, but don't have enough to supply all their raw-materials needs and are also expected to raise prices by about 19%. |
