Monday, December 20, 2004
Steel Pricing and the Price of the American Dollar
Over the past 6 months, steel prices have gone through the roof (and steel availability has deteriorated alarmingly, despite the high prices). This has happened everywhere in the world.
The root causes are many, but some of the major ones are shortages in steel raw materials like metalurgical or coaking coal and recycled steel and heavy demand for steel products in China (which is going through a belated industrial revolution).
Here in Canada, the rise in the cost of steel has been (somewhat) offset by recent weakness in the US dollar. Most steel we get here is directly or indirectly priced in US dollars, and since the Canadian dollar was strong against the American, that took some of the sting out of recent prices.
Well, that may all be coming to an end. The rise of the Canadian dollar has abated, at least for the moment. You can check this out for yourself at Yahoo's currency conversion page.
We haven't seen new steel prices in the last week, but I'm bracing myself for sticker shock.
In the longer term, leaving aside currency conversion issues for a second, steel prices (and lead times, and availability issues) are forecast to stay high for the first half of 2005. After that, new mining (iron ore and coke) and production capacity, in North America, in Europe and in China itself is expected to exert itself and increase total global capacity and reduce prices and wait times.
As always, the question is, what can our customers do in the short and medium term to control prices.
The answer is, give us a blanket for about a years worth of parts (or give us authorization to buy steel ahead of parts orders). This allows us to
Michael Wager, Owner, Hamond Industries Ltd
The root causes are many, but some of the major ones are shortages in steel raw materials like metalurgical or coaking coal and recycled steel and heavy demand for steel products in China (which is going through a belated industrial revolution).
Here in Canada, the rise in the cost of steel has been (somewhat) offset by recent weakness in the US dollar. Most steel we get here is directly or indirectly priced in US dollars, and since the Canadian dollar was strong against the American, that took some of the sting out of recent prices.
Well, that may all be coming to an end. The rise of the Canadian dollar has abated, at least for the moment. You can check this out for yourself at Yahoo's currency conversion page.
We haven't seen new steel prices in the last week, but I'm bracing myself for sticker shock.
In the longer term, leaving aside currency conversion issues for a second, steel prices (and lead times, and availability issues) are forecast to stay high for the first half of 2005. After that, new mining (iron ore and coke) and production capacity, in North America, in Europe and in China itself is expected to exert itself and increase total global capacity and reduce prices and wait times.
As always, the question is, what can our customers do in the short and medium term to control prices.
The answer is, give us a blanket for about a years worth of parts (or give us authorization to buy steel ahead of parts orders). This allows us to
- Buy far enough ahead to secure reliable supply
- Buy from the widest selection of suppliers to improve competition and price.
- Buy the entire years worth (if it's stainless or galvanized or aluminized steel) or about half a years worth (otherwise). The processing costs can be vastly reduced if our supplier can process a larger quantity of steel. This is almost always cheaper than the bank costs of holding the extra steel.
Michael Wager, Owner, Hamond Industries Ltd
This BLOG brought to you by
Hamond Industries Ltd - the Slide Forming Specialists
