Wednesday, May 21, 2008

FEMA Reports steel prices have doubled this year.

Farm Equipment Manufacturers Association (FEMA) reports: reports that the largest steel users can expect to pay as much as $1,200 a ton for hot-rolled steel, and $1,300 for cold-rolled by July. This is about double the cost since the first of the year. Small companies can expect to pay an additional $200 on top of the already high prices.
Some hope is on the horizon however, after summer's peak prices, hot-rolled prices will fall to $900 per ton by December, due to the usual seasonal slackening in demand, the report said. Analysts expect that as the dollar starts to post firm gains against other currencies later making imports more attractive, the price outlook for steel will start to change for the better.
This assumption hinges on a strong dollar and lower steel prices, and that China and India don't decide to ratchet up manufacturing, and that labor problems don't shut down coal or iron mines in Australia.
Brazilian and Australian suppliers of key steelmaking ingredients iron ore, iron pellets and coking coal, have boosted prices more than 60% since January to offset the dollar's decline. Further sharp price hikes are certain by midyear. Domestic prices for scrap metal used in mini-mills that make about half of U.S. steel, have soared 80% since January.
The steel pricing cycle is now out of balance, analysts say. Manufacturers and other steel users still have a demand for steel, but expensive imports aren't much of an option.
Steel users are continuing to buy steel, but they're keeping inventories low because they believe the dollar will strengthen and prices for key steelmaking inputs such as iron ore will fall sometime later this year.
Steel users don't want to get stuck with steel they bought for $1200 a ton if prices fall to half that amount.
With steel inventory strategies turned upside down, steel users will have to keep paying up for the commodity until the dollar begins to recover

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