Monday, May 19, 2008
Can Steel Stocks Continue to Climb?
This is from a share-holders prospective, but it's interesting none-the-less.
Seeking Alpha
We often hear a lot of discussion, and rightly so, about the prices of crude oil and the agricultural commodities. Their moves over the last year have, in some cases, been parabolic. Their effect on produced gasoline and food prices are also well documented. Less talked about, but increasingly visible and important, is steel.
Steel prices are continuing to rise, with the alloy's average composite weighted price for all carbon-steel products around $1,000 per metric ton [...]
While the charts certainly look nice, you have to wonder how long companies can continue to increase prices - not only in response to demand, which could decrease, but also with regard to raw material cost, which have been rising. Will costs get so high that demand destruction will occur? Will raw material cost increase faster than companies can increase product prices, thereby reducing profit margins?
Both customers and companies are beginning to take action, but in some cases they are at the mercy of the markets. In Turkey, a number of construction companies are going on strike, protesting price increases. In India, transportation and housing projects have been put on hold. Other countries are limiting the amount of steel that can leave the country as exports, while at the same time freezing prices and reducing tariffs to increase imports. Even oil companies are beginning to worry that they cannot build or obtain the equipment they need to extract the oil that is in such high demand.
Seeking Alpha
We often hear a lot of discussion, and rightly so, about the prices of crude oil and the agricultural commodities. Their moves over the last year have, in some cases, been parabolic. Their effect on produced gasoline and food prices are also well documented. Less talked about, but increasingly visible and important, is steel.
Steel prices are continuing to rise, with the alloy's average composite weighted price for all carbon-steel products around $1,000 per metric ton [...]
While the charts certainly look nice, you have to wonder how long companies can continue to increase prices - not only in response to demand, which could decrease, but also with regard to raw material cost, which have been rising. Will costs get so high that demand destruction will occur? Will raw material cost increase faster than companies can increase product prices, thereby reducing profit margins?
Both customers and companies are beginning to take action, but in some cases they are at the mercy of the markets. In Turkey, a number of construction companies are going on strike, protesting price increases. In India, transportation and housing projects have been put on hold. Other countries are limiting the amount of steel that can leave the country as exports, while at the same time freezing prices and reducing tariffs to increase imports. Even oil companies are beginning to worry that they cannot build or obtain the equipment they need to extract the oil that is in such high demand.
Labels: manufacturing, steel
