Monday, June 02, 2008

Surging steel prices shock auto industry

Sharp increases in steel prices -- up as much as $500 per vehicle since January -- have left automakers and suppliers reeling. Tensions are rising as steel makers tear up contracts and demand immediate price increases. Steel and automotive executives say that ArcelorMittal -- the world's largest steel maker -- and other steel mills notified the Detroit 3 last month that they will impose surcharges as high as $250 a ton.

Headline from Automotive News.

The automotive industry has been protected in the past due to fixed price annual contracts. In fact the auto manufactures have for many years operated a "cost down" supply model, causing big problems for component manufacturers and steel suppliers alike. My only surprise is that it has taken the industry this long to "wake up". Welcome to the world that the rest of the steel using industry live in.


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