Now is not a good time to be a “middleman” or re-processor in the steel industry as reported by Motley Fool in it’s article on Steel Technologies. When steel prices are rising it can be difficult to obtain the raw material price increases from the end customers. Stockholders, Service Centres, Re-rollers and processors find their margins “squeezed” as they negotiate price increases for their end product whilst the raw material cost increases are often imposed by the steelmaker. The “spot” market is unlikely to offer comfort as the lack of supply invariably reflects in higher prices there too.
Particularly difficult times exist in the galvanized and stainless market sectors as zinc and nickel prices soar. Whilst it is arguable that some companies can benefit from stock value gains, most steel processors have insufficient stocks to offset any delay in recovering current increases.
We can only hope that the second half of 2006 brings some stability in steel prices.
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