Hot-rolled steel prices are heading for record highs

The outlook for the second half is slippage

By Tom Stundza -- Purchasing, 2/27/2008 12:15:00 PM

As every steel buyer knows, the current cost-driven environment is driving prices to record highs—with further increases probable in coming months. So, while the actual average transaction price for hot-rolled sheet in coil is $663 this month, according to Purchasing surveys of buyers, the mills have announced prices for March in a range of $670 to $700. Looking ahead, most market mavens believe buyers will have to pay dramatically higher prices ahead—as much as $780 by May—since low-priced foreign tonnage has all but dried up. 

“The steel industry is presently operating in a volatile environment, in light of a slowdown in the U.S. economy, rising input costs for steel production and increases in prices for steel products.” That’s the word about the local market by Ternium, which makes a variety of steel products in Mexico, Venezuela and Argentina and sells the mill products throughout North, Central and South America.

“In the North America Region, an adequate balance of steel inventories, imports and demand is enabling increases in flat and long steel prices as a result of higher raw material costs,” the company says in its latest outlook, “notwithstanding the reduction in steel demand from the construction and auto industries.” The company reports it sold 30% more steel products overall in North America in 2007 than in 2006 even though flat-rolled products dropped by 9%. Looking ahead, the company is unsure about demand in 2008 but believes prices will continue to rise to offset higher raw materials, energy, freight and labor costs.

However, David Kay, executive vice president and CFO of hot-rolled sheet in coil converter Gibraltar Industries of Buffalo, N.Y., has joined a group of analysts who don’t expect flat-rolled steel prices to continue climbing all year. He tells Wall Street analysts in a conference call this week: “I don’t think anybody’s forecasting the price to stay at $750 for the whole year.” He adds that his financial team members “certainly have not put a plan together that says steel pricing will be between $750 and $800 a ton” for the rest of 2008.

Like what you see?
This news item came from our Price + Supply Alert e-newsletter. If you would like to subscribe to this free weekly e-newsletter, CLICK HERE.