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Monday, February 23, 2004
Rapidly Rising Steel Prices
We've been tracking a fast-developing situation: the rapid rise of raw steel prices. Steel prices in the U.S. have jumped 30% in the last two months.
In turn, that's put a real squeeze on contractors and manufacturers that use steel for their products and building projects. Many of them are small and midsize businesses, which can't easily absorb price increases. Especially at a time when they are just coming out of a recession.
Apparently a major contributing factor is high demand for steel in Asia, especially China.
Today's Wall Street Journal has a front page article on steel prices (requires subscription). Buried deep in the article is this comment:
"A group of steel consumers and producers is considering petitioning the federal government to limit exports of steel scrap, which is used as a raw material to make new steel products."
Having lived most of my life in two U.S. cities where steel is a BIG deal (Pittsburgh and Cleveland), it's beyond ironic that a country that used to produce more steel than any other now can't seem to get enough supply. And is even considering a petition to limit the export of steel scrap. It gives food for thought in the offshore outsourcing debates. Companies need to think -- really think -- about the long term effect of outsourcing critical parts of the supply chain.