Steel prices fall, Output slowed to reduce inventories; ’05 outlook stable

Northwest Indiana Times Business

A retreat from the steep steel prices that shocked the industry and its customers in 2004 could mean lower profits for producers. Lower steel prices also could squeeze margins for service centers and distributors that still are holding high-priced inventory.

A retreat from the steep steel prices that shocked the industry and its customers in 2004 could mean lower profits for producers. Lower steel prices also could squeeze margins for service centers and distributors that still are holding high-priced inventory.

In the short term, steel users and consumers aren’t likely to benefit from the lower costs because most steel used in consumer products is bought on contract, and a large percentage of contracts were renegotiated in 2004 during the height of the price hikes, according to steel analyst Charles Bradford, of New York-based Bradford Research/Soleil.

Service centers, small manufacturers and the construction industry buy their steel on the spot market.

Steel spot prices soared from late 2003 to the fourth quarter of 2004 on heavy Chinese and steady domestic demand. Hot rolled steel prices moved from a low of $300 a ton in mid 2003 to more than $756 a ton by the following September.

Since the high point in late 2004, spot prices have declined steadily and in April were $575 a ton, according MEPS, a Great Britain-based global steel industry consulting company.

‘U.S. transaction prices are still trending downwards,’ the company said in its April market report.

‘Mills are reducing production or bringing forward maintenance outages in the face of high service center inventories. Some manufacturing activity has also declined. … Producers have tried to hold the line on prices, but volumes are dropping fast and, some further discounting has taken place.”

Tom Stundza, executive editor of “Purchasing Magazine,” reported that April spot prices for many carbon steel grades have continued their a seven-month slide.

“It’s also now obvious the big turnaround from far rosier forecasts of just a few months ago could continue through summer,” he stated.

In other words, the drop in prices may mean steel companies won’t see profits double as they did from 2003 to 2004.

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