Wednesday, June 04, 2008

Good Times For U.S. Steelmakers

A decline in imports is giving a boost to U.S. steel producers.

Last week the American Iron and Steel Institute reported that monthly imports of finished steel to the U.S. fell year over year as the weak dollar, high shipping rates, and strong overseas demand kept steel imports from reaching American shores.

This is good news for U.S. steel producers. The decline in imports limits supply, forcing U.S. steel companies to use full production capacity and allowing them to raise prices, according to Longbow Research analyst Bob Richard. As a result spot steel prices, which are prices for immediate delivery, have surged.

Now steel producers are trying to close the gap between spot steel prices and contract prices for 2008, by raising prices on the latter, said Richard. He added that if steel producers are successful at repricing their contracts there will be “considerable upside to earnings estimates next year.”

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