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price of steel

pilgrimtt

Cast Iron
Joined
Dec 15, 2005
Location
St. Cloud, Mn.
I went to the lumberyard in Dec. to price out a small pole building for my farm animals. In the middle of Jan. they called to warn me that steel was going up 5% Feb. 1, March1, and April 1. Anyone else hear of such goings on?
 
All I know is that I got 140 bucks for a ton of scrap 2 weeks ago, vs 115 in october. i'd imagine the cost of scrap would lead the cost of new steel by a little bit.
 
Steel is a commodity.
If anybody knew, in advance, that steel was going to cost more on March first, they would be trading futures contracts, and quickly becoming mega-billionaires.

Your local guys can schedule price increases whenever they want- but the world price of steel is always going up and down, and large quantities (I believe it is sold in 40,000lb increments) are repriced daily.

For instance, I buy a lot of stainless, and my price now is the same as it was in August, but in November it was .30 a pound more. It came down, my supplier lowered his price.

If you buy from a lumberyard, you are paying for the profit and handling and shipping charges for about 3 middlemen.
If you buy in quantities of a ton or two or more, from a steel distributor, your prices will be marked up from the international ones, and will go up and down as international prices do.
 
I just went in with a friend on a 360 brass purchase, 600lbs total. Average cost was $4/lb and they said they would buy the chips back for $3/lb. This was 1/2 to 1/3 the catalog price and free shipping to boot. Order size does matter.

Ted
 
My newspaper lists the price of scrap steel on a daily basis.

For the last several weeks, it has been 335 bucks a ton.

It is a REALLY Republican paper. Do you think they would publish rising prices for scrap in a REPUBLICAN admin?

Copper is around 3.35 per pound, silver near 17 bucks per ounce, corn, for eats or burning, at 5 bucks a bushel.

We are in for hard times.

Your material costs can't help but go up if the scrap to make it goes up.

Before you bid any job, you should check the cost of material. Daily change, though your supplier might be a day late, a dollar short.

Cheers,

George
 
There once was a time when US Steel set prices for the entire industry, and everyone else followed along. Now that steel is an internationally traded commodity there are no stable steel prices any longer.
 
Right now.
Which is why 3 different foreign companies are spending between $1 Billion and $3 Billion each to build new primary mills in the USA.

The Indians are building a $1.65 Billion dollar mill in Northern Minnesota, right next to the Taconite mountain range they bought.
http://www.reuters.com/article/mergersNews/idUSN1826651120070418

The Germans are building a HUGE mill complex down in Alabama- $3.7 Billion
http://blog.nam.org/archives/2007/05/globalization_h_6.php

And I cant find the link right now, but I think its the Chinese that are going to build another one somewhere in the south.

And this russian guy is thinking about dropping another Billion in Ohio, for a sheet mill-
http://www.iht.com/articles/ap/2007/09/15/business/NA-FIN-US-Steel-Mill-Russia.php

Currently something like 60% of our steel is made here.
But curiously, more and more of it is made by foreign owned companies, who are investing billions and billions in USA mills, and employing americans.

Meanwhile, US companies do things like buy Yahoo for $40 Billion... Steel mills are just so yucky, lets let those foreigners get their hands dirty.
 
Ries,

When you said primary, are you meaning steel from ore vs remelters?

Thanks,
Clutch

The linked articles point out that the Indian Plant may be a primary steel making venture.

"Minnesota Steel is planning to build a new steel mill on the Mesabi iron range in northeast Minnesota that will include ore mining, ore processing, direct reduction and steelmaking on one site."
-----------------------------
The Alabama plant will process imported primary steel into cold finished sheets.

"The mill is designed to import and process crude steel slabs manufactured by ThyssenKrupp in Brazil. About 40 percent of its products will be shipped to automotive customers in the U.S., Canada and Mexico. The rest will be split among appliance and machinery manufacturers and the construction and utility industries."
----------------------------
The Ohio plant will be processing cold Rolled for the Auto Industry.

"There is precedent for MMK's interest in having a U.S. mill to supply cold-rolled steel for the auto industry."

Walter A.
 
Currently something like 60% of our steel is made here.
But curiously, more and more of it is made by foreign owned companies, who are investing billions and billions in USA mills, and employing americans.

I don't know why anyone would find this curious. Couple this with Wall Street firms "hat in hand" looking for foreigners to bail them out and state governments selling roads and bridges to foreigners and I can't help thing of the following quote by Thomas Jefferson:

"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered."

So there you have it, they are taking all their depreciated dollars, before they are worthless, and buying up hard assets. I don't even want to get into how they got all the dollars in the first place.
 
Right now.
Which is why 3 different foreign companies are spending between $1 Billion and $3 Billion each to build new primary mills in the USA.
Currently something like 60% of our steel is made here.
But curiously, more and more of it is made by foreign owned companies, who are investing billions and billions in USA mills, and employing americans.

Meanwhile, US companies do things like buy Yahoo for $40 Billion... Steel mills are just so yucky, lets let those foreigners get their hands dirty.

Nothing really strange here, legacy costs are killing old line companies in basic industries
in the US. When a company has 3x or 5x as many retirees as active workers based on
50-75 yrs as a going concern, its effective productivity is greatly diluted by the overhead
of the retirement costs. A foreign concern has zero retirement overhead and likely will
never have any in the new era of DIY retirement plans for non-governmental jobs.
With commodity prices like they are a couple of billiion in upfront costs can be paid down
in 5-15yrs while still making a pretty good profit. Ford and GM have un covered pension
costs in the $75B range and both companies are doing there damndest to off load or
buy out for a fraction of the cost. Autoworkers union is sort of going along with this.
Old line auto parts plants are going bankrupt all over the place for the same reason,
Vista, Delphi, Danaher etc while Japanese and German autoparts companies are setting
up factories all over the place to supply parts to (natch) Japanese and German auto
factories.
 
SCH,

lack of capital investment is more likely the cause than "legacy costs" The germans and europeans have plenty of "legacy costs", but they tend to invest in the future instead of stealing from it as we do.

jon
 
The Minnesota Mill is primary- that is, from ore.
The Krupp mill will be using slabs rolled in Brazil, where they have their primary mills.
I seem to remember that the other one, the one I cant find right now, was gonna be a primary mill as well.
Not sure about that though.

Somehow Nucor manages to build remelt mills here in the USA, and since they have been in business since 65, its not like they dont have retirees as well- although my bet is they cut more advantageous deals in terms of retirement. Advantageous to them, the company, that is.

But sometimes its just time for a company to die. And USS seems pretty close right now.
That is no reason that an american company couldnt build a new mill- and have the same lack of retirees with fixed pensions as these german, russian, and indian companies.
We do have billionaires here too, you know- they arent all foreign.
Although the chinese have something like 100 new Billionaires in the last ten years.

But our billionaires blow their money on silly toys- I went to high school with a few guys who are now billionaires- and they got more helicopters, yachts, estates, collectibles, internet startups, and fancy hobbies than you can shake a stick at. But no steel mills.
 
Legacy costs in Europe tend to be provided by the government, as do
health care costs, not the company. US Steel, Ford, GM and Chrysler
can't off load legacy costs by building new plants. The automakers tried
spinning off their auto parts divisions but got bitten in the rear by the off
loaded legacy costs in the autoparts divisions swamping the the spun off
auto parts companies. Ford and GM have both had to take back some of
the legacy costs in Delphi and Vista.

Unfortunately, one way to deal with legacy costs is to close (bankrupcy
or by selling off) the company. When the company disappears those
legacy costs that can't be funded disappear also, sometimes off loaded to
the taxpayer, sometimes just evaporating as the clouds of vapor they
were.
 
they don't even know.

I called for a quote on some 303 stainless. the lady said it would be back ordered and she wouldn't give me a price until it came in. it was only 3 days later.
last year they would give you a price and tell you it was good for 30 days.

billy
 
I'm trying to sell 200 lbs. of 65% high carbon ferrochromium, but can't get much more than 35 cents a pound for it. I don't know how it could be worth less than stainless steel scrap, which is at 45 cents a pound now.

BTW I just hauled my 1994 F150 down to the scrap yard and got $430 for it. I paid $400 for it two years ago! :)
 
There are a number of economic motivators behind the rising costs of commodity products... It really isn't a one-answer question.

Yes, China and India play a role, however, there is a reflexive component to pricing and a lot of the sharp up-ticks we've seen in commodity products are a result of that. Still, the days of cheap, low cost ratio commodity products are gone. Don't EVER expect to see them again.

I'm a part-time Chicago resident and am quite familiar with the Merc exchange. A few of my poker buddies are traders there. Really, it isn't as much that commodity products are "high" right now as much as it is that they were artificially low for a long, long time- kinda like housing in the 1980's and 1990's.

There are a ton of variables that go into pricing commodity products beyond simple supply and demand. Production costs, geopolitical matters, taxation, but the biggest one of all is speculative premiums.

While it's easy to blame "big oil" for the rise in oil prices, people really need to understand that oil companies (or steel companies, or copper companies, or corn growers) are simply a producer of a product. It's the aftermarket- the "trading pit"- where the premiums are born and in turn, that's what causes the consumers to have to pay more.

Here's an example of how these things work, and how easy they can be manipulated.
Remember a month or so back when all the media outlets were crowing about oil finally breaking $100 a barrel? The end of the world is nigh, we're all gunna die, there goes the neighborhood, etc, etc, etc...

They forgot to mention one thing... The $100 a barrel price-point wasn't established by a broader market demand, but rather, one single vanity trade placed by one single trader (Rich Ahrens) who put out a call order for 1000 barrels (a minimum order) @ $100 per, immediately sold it seconds later for a $600 loss and cemented his place in history as the man who sent oil over $100 a barrel. This had nothing to do with "big oil", George Bush, the quarterly profits of Exxon, etc... These same sort of things with everything from pork bellies to cotton to peanuts.

The prices of commodity products are dictated by market buyers, not by sellers or consumers of the end product. These traders aren't buying an inherent "efficient market" value in the product, but rather, simply speculating on what it will cost tomorrow.
As far as the US producing more, that's going to be hard since steel is so labor intensive. Unless we can rebrand American steel as being the "best steel out there" (as it was once viewed), we'll probably never enter that game on a large scale again.
 
Actually, modern steel mills arent very labor intensive at all.
Read the excellent book about Nucor, The Legend of Nucor, and you would be amazed how few guys it takes to run a modern, computerised mill.

Needless to say, all of the new mills being built in the USA are highly automated.

While the chinese and other third world countries were buying used steel mills 20 years ago, virtually everybody, worldwide, who is building new mills today is building very high tech, low labor mills.
The biggest cost is energy, and a modern mill uses a lot less energy than a used USS mill that was built in the fifties.

The reason the foreign companies and american companies like Nucor keep building mills here in the USA is because shipping costs on steel are a much bigger component than the labor cost differential for most types of steel.

Krupp is sending up billets from Brazil for their new mill because they have a newish, state of the art primary mill in Brazil with government subsidised cheap energy. If they could get really cheap power here, many companies would probably build new primary mills here- we have, after all, lots of taconite ore here.

One thing to remember though, is that our days as the number one consumer of steel are long gone, never to return. China now consumes about the same amount of steel as the USA, and produces more. In the old days, we consumed more steel than anybody else, by far- so we were the dominant market, and it made sense to make the steel here.
Nowadays, China, India, the middle east, and other developing countries are consuming far more steel, combined, than we do- so it is only natural that steel producers will build mills near the markets.

With today's energy prices, its unrealistic to expect we would export much steel, even if we had the capacity to make it. Which we dont- we make less than we use.
Companies will continue to build mills here to supply domestic demand, but not much for export- some high end, specialty stuff, but ordinary steel will be made in the countries that use it, more and more. Steel is a source of national pride to produce, and every major country, like India or China or even Brazil, wants to make it at home.

In general, we are still thinking like we are top dog, but sheer numbers mean we are less and less important in the overall scheme of things- the total population of the USA is about equal to the plus or minus error in calculating China's population.
 








 
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