Steel costs to pinch auto parts makers

Detroit News – Autos Insider: U.S. suppliers’ prices expected to rise 26% as demand from China doubles.

U.S. auto suppliers expect steel costs to increase an average of 26 percent in 2005 from this year while their ability to raises prices is hindered by automakers buying fewer products and refusing to pay higher costs, a survey showed.

‘The question is when will steel prices return to normal and what will normal be,’ said Mike Petro, of Arabia Inc. of Sunnyvale, Calif., which helps customers in purchasing decisions.

A ton of hot rolled steel, the industry benchmark, is expected to cost $630 next year compared with the average $350 a ton in 2003. Suppliers paid from $360 a ton to $580 during 2004.

Higher steel prices, coupled with planned production cutbacks by Ford Motor Co. and General Motors Corp., will force suppliers to look for other savings, analysts say. Alternatives may include cutting jobs and shifting production to nations with lower wages.

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