We hate to be bearers of bad news, especially while we’re still hurting from the last few years of economic downturn, but there’s no escaping this scenario – rising steel prices! Last April, we blogged about the negative impact that rising steel prices had on manufacturing companies, but there seems to be no end in sight to this trend. Since November of 2010, steel prices have been climbing steadily. In fact, most reports anticipate anywhere between 20% – 40% increase in prices from November 2010 to March 2011.
So how is the U.S. Manufacturing Sector dealing with the increases? According to the Wall Street Journal, some companies are passing at least some of the costs down the supply chain, or increasing production to offset costs, or stockpiling larger quantities of raw materials – namely steel in this case – in anticipation of further rising prices. Stockpiling isn’t always the best solution in this situation because it creates an artificial demand and drives prices up even more.
According to the WSJ, steelmakers have increased the price of basic flat-rolled steel six times since November 2010, amounting to a total of 20% – 30% increase in the price of steel within that time period. The price of structural steel increased by 15% this week alone. Prices on all steel products are anticipated to increase by 40% from December 2010 to March 2011.
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If this trend continues, and from all accounts it seems like it will continue well into the summer of 2011, manufacturers like Bluff are going to feel the squeeze. High steel prices have already been hurting us, but we have been finding ways to counteract that with increased productivity and sales. But with prices continuously increasing, this is going to impact the bottom-line and hurt first and second quarter profits.
As manufacturers, we have been doing everything in our power to avoid passing on these increases, including bearing these initial price increases ourselves in order to promote economic recovery and stimulate growth. However, it is the right time for Manufacturers and Distributors to get proactive and communicate these market conditions to customers and prepare them well in advance for possible price increases in dock boards and yard ramps. We look to distributors to also participate in our efforts to not pass on increased raw material costs to our customers and help bear the burden of these external market conditions.
Besides increasing productivity and running on full steam to counteract these market conditions, there is little else we can do except to wait, watch and see. And of course, keep the customer informed and prepared.