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Skyrocketing Steel Prices Rock Electrical Market

May 1, 2008 12:00 PM

Electrical manufacturers are being forced to increase prices by at least 5% to 10% on steel products. Industry observers say contributing factors include rising raw material costs, a weak U.S. dollar, and other global factors.

According to several sources, the cost of iron ore is up 65%, and scrap steel has gone up 36% over the past five months. Just six months ago, steel prices were $500 a ton, and now the price for hot-rolled steel has hit more than $800 a ton.

“Steel prices in general have exploded in the last two months,” says John Anton, director of Global Insight Steel Service, Walton, Mass. “They are up about 50% since December, and while they should have increased, 50% is a bit on the ridiculous side.”

Anton said electrical steel has been under pressure because of the building of electrical infrastructure in the United States, rebuilding after Katrina, and demand in China and India.

“Things will improve, but for right now, it's definitely a seller's market,” Anton says.

The number one issue probably is rising raw material costs, according to David Burnett, national sales manager, electrical division, Wheatland Tube, Swathmore, Pa.

“Certainly a big part of what is driving all of this is the weak U.S. dollar,” Burnett says. “The dollar is so cheap you have scrap steel prices that are as high or higher than what we were paying for finished hot-rolled six months ago. In the last several months, the iron ore miners have successfully negotiated a 65% increase with the major steel mills around the world. Coke and coal is rising 40% to 50%, scrap steel prices have skyrocketed, and U.S. scrap steel is flowing offshore to countries like Turkey, which are buying up the scrap steel.”

Don Brody, vice president of sales, Hubbell Electrical Products, agrees that many global factors have contributed to the need to increase steel prices. “We certainly didn't anticipate the last round of increases that we got, and we had no choice,” says Brody. Hubbell implemented price increases on April 1.

“We've had price increases on a weekly or biweekly basis recently,” says Wheatland Tube's Burnett. “What Wheatland Tube is trying to accomplish is announcing small, reasonable increases without notice so distributors don't feel compelled to make decisions about whether or not to load up.”

Source: Electrical Marketing, March 14, 2008.

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