From Mlive.com Michigan
While much attention has been focused on the surging price of oil and gas, the cost of steel doubled in the last six months.
At Klein Steel Service Inc., General Manager Kenneth Woodring has watched the price of plate and sheet steel that his Town of Tonawanda company processes, change as much as two or three times a day.
"Prices are rising steadily - just like people are seeing at the gas pump," he said.
At all levels, steel prices have been trending upward at a remarkable pace, especially since Jan. 1. For automakers, for example, they total as much as $500 per vehicle since early this year.
Industry insiders say they've never seen anything quite like it. Steel makers are tearing up contracts with their customers and demanding immediate price increases. Limits are being placed on how much steel a customer can buy at one time. Prices are subject to change in a matter of days.
In the auto industry, the benchmark for steel prices is hot-rolled carbon sheet steel used to make bumpers, wheels and frames. In the fourth quarter of 2007, the spot-market price was $535 a ton. Today, the price - which is somewhat above contract prices - has almost doubled to $1,035.
Woodring, whose company processes steel for customers in the industrial and construction sectors, said: "We have had a 120 percent increase in plate steel prices since June 2007 and 100 percent since Jan. 1."
Among end-users, companies such as Klein Steel customer Five Star Industries Inc. are struggling to adjust to the rapid price rises.
"At our end, we've seen probably a 30 percent increase from the steel companies - a little less from Klein where we have a long relationship," said Greg Vastola, president and co-owner of Five Star, a Buffalo machine shop.
Klein provides Five Star with the raw steel - bar, angle and sheet - as well as special-cut steel for the industrial and commercial fans and components that it makes.
Vastola said that in some specialty steel - like stainless - there is now is a quote limit of five days, meaning the price is subject to change after five days.
"I believe regular steel has a 15-day limit. Before this started last summer, I think it was 15 days for specialty steel and 30 days for regular," he said.
Kenneth Houseknecht at Gibraltar Industries Inc. said the squeeze on supplies and rising prices reflect the sharply rising demand for steel globally - especially from the expanding industrial economies of China, India, Russia and Eastern Europe.
"It's supply-and-demand," he said.
The weakness of the U.S. dollar is an added factor because it makes imported steel more expensive.
Hamburg-based Gibraltar, a specialty metal processor that uses hot rolled steel to produce automotive and building products, has watched the price of steel climb from $535 a ton in the fourth quarter of 2007 to $692 in this year's first quarter to $1,000 or above in the second quarter.
"It's unprecedented," said Houseknecht, Gibraltar's director of investor relations.
Like others, his company has had to pass on its higher costs to customers in the form of price increases.
In the auto industry, these include Ford, GM and Chrysler and their suppliers, and foreign manufacturers with U.S. production facilities - Toyota, Honda and BMW.
Gibraltar's building products customers include Lowe's, Wal-Mart and Home Depot.
"It's fair to say that if steel goes up, everything that includes steel - all or in part - is going to reflect the higher costs," Houseknecht said. "(Steel) is not much different than the global oil market where prices have doubled in the same period."
Steel is Gibraltar's largest-volume raw material, but the company also uses copper, plastic and aluminum, where prices also have been hiked.
The limits on the steel that mill suppliers will sell to customers is putting additional pressure on smaller companies. Woodring said.
Between the time that a job is bid using one price on the steel and if the company wins the contact goes to make the purchase, the price might have risen several times.
Because of the price change, the company or contractor might have to back off from the job, accept a larger risk, or increase the project's cost.
Houseknecht says that when prices will stabilize or begin falling is anybody's guess.
"I'll leave the prognosticating to people far wiser than me," he said, then added, "I think we are reaching a point where pricing appears to be peaking"