Price Check Prices "Churning" in the price of steel.

[goodoleboy]

Prices \"Churning\" in the price of steel.

Ive read various topics on "buy now, steel prices are going up" on various things made of steel trailers to tractors on many different types forums besides TBN.

My thoughts on steel prices.

I think it is a cross between "Consumer Expectations" and churning to describe the situation I kinda think the market is being "churned" in a way so to speak. For those unfamilar with the term it is similar to a few years ago where day traders where getting on the interent saying in various chat rooms that "XXX stock is going up Buy now its hot" but the price was only going up becuase of this "fake Press" being genreated in different chatrooms.. It was made illegal after the SEC found out about it.
Im kinda thinking something similar is going on with the steel price panics. But it can be concealed more easily since high demand and low Supply brings out higher prices. So with everybody "hurrying" to buy there tractors and steel prodcuts before the prices go crazy, it keeps the prices abnormally high.

Does anyone agree or disagree?

 

[rtimgray]

Re: Prices \"Churning\" in the price of steel.

I am by no means an economist, but I have wondered lately about the "supply and demand" principle. Such as, gas prices/oil prices are up, so we must assume that gas supplies are limited, yet I have not heard of any shortages, long lines, etc. Same thing with OSB/Plywood and other lumber prices - prices went through the roof last fall and have never reallly come all the way back down. Every time I called a supplier, and since I'm building a house, I've called lots of suppliers, they always had plenty of everything in stock - how can there be a shortage when lumber outlets have so much OSB/Plywood in stock that they can't keep it under cover.

Steel, though, seems different. At work, when we are looking at doing projects involved construction/fabrication, etc. we check steel prices and availability. Many time recently, we have not been able to get steel for 4-6 weeks because we have to wait for the mills to make it. Similarly, there are some kinds of steel we can get all the time, but for many I shapes, C shapes, T shapes and some plates, we have to wait.

In conclusion, I don't know. It seems to me like the steel thing might be real, just because there really does seem to be a shortage. I'm not sure about the other stuff..

 

[sneaky_pete]

Re: Prices \"Churning\" in the price of steel.

The demand for steel is real, and (as far as I can tell) is being driven by two major things: 1) the demand in China; their economy is finally starting to boom and their industry with it. They don't have many steel mills (yet), and they are buying all they can get in the international markets. Some of it is undoubtedly going to make Jinmas. 2) In this country, we are experiencing an oil & gas boom due to sustained high crude oil and natural gas prices, and as the drilling rig count goes up so does the demand for tubular goods - steel drill pipe and well casing. The prices for these have gone up 30% in the last 4-5 months alone.

That's how I see it from inside the oil bid'ness.

Pete

 

[boustany]

Re: Prices \"Churning\" in the price of steel.

Its virtually impossible steel prices are being pumped.
Stock prices are easy to manipulate, especially those of small companies because there is limited information available to the public, and the 'marginal price' is determined by people who know little or nothing about investing, the company in question, or the industry.

In my day job I come across this sort of thing all the time. Its appalling, but there are lots of 'willing victims'. In fact in the US there are hundreds of publicly traded (mostly pink sheet) companies whose business is being a stock scam. So long as all the disclosures are made, its not even illegal.

As for steel, there are a large numbers of suppliers in most countries. Nobody really controls the supply of iron ore, and you can pretty much produce steel anywhere, so nobody can control the supply of steel (or, more importantly, nobody can determine the marginal price of steel, as is the case of oil (any one of Saudi, Argentina, or Russia could, if they want, affect oil), diamonds (not rare, but Debeers controls supply), and a few other commodities.

Remember, it wasn't that long ago that the steel price was so low the US instituted punitive tariffs.

Basically, the 'problem' is demand, not supply. China, and to a lesser extent India, are developing their economies. This means that there is slightly more demand for steel than before.

As I understand it, a lot of steel production is based on scrap, even though there is plenty of iron ore, and a plant that makes steel out of ore is different from one that makes it out of scrap. So, there isn't enough scrap to go around, so the manufacturers are making all the steel they can with the scap thats availaible.

Within a year or two, plants that can make steel from ore will be built or re-commissioned (a lot were shut down when the price went so low), and the price will come down.

Unless oil comes down, I doubt the price will be as low as it was, unless oil plummets. The neat thing with oil is that nobody knows how much Saudi has left. Of course the absolute cost of steel may remain high (because of the likely coming inflation) but in constant dollar terms it'll come down.

As for plywood and construction materials, etc., part of that is demand (all the new houses being built thanks to low interest rates) and part is supply (thanks to the US's punitive tarriffs on Canadian producers - YOUR government working for YOU, remember). The good news is that the Canadian manufacturers are getting much more productive.

In any event, this is all part of a natural cycle. You may be mad at China for developing, but they are financing the US current accounts deficit and budget deficit by being one of the largest buyers of US govefrnment bonds. Plus, they've kept inflation low with their cheap products.

If they didn't do all this stuff, (especially finance the current accounts deficit) the US dollar would plummet and interest rates would jump by a factor of two or more. Given the unpredicented levels of public and consumer debt, its a darn good thing these commies are being so helpful. /forums/images/graemlins/crazy.gif

This worries the heck out of me - and I don't even live in the US! /forums/images/graemlins/crazy.gif

Don't worry, be happy. /forums/images/graemlins/crazy.gif

 

[KiotiJohn]

Re: Prices \"Churning\" in the price of steel.

boustany, I think you've put the case very well. It jives with everything I've been reading for the past 6 months, and there seems to be a general concensus that the cylces demand that steel will come back down in the not-so-distant future.
As for China, they are not only impacting steel, due to a huge increase in their automobile market as well as tools and tooling etc., they also are making a large impact on the cement business.
For the last few months one of the major suppliers of concrete in the work, headquartered here in my city, has been requiring contractors etc. to order way out because a lot of ships have been diverted with concrete to China. There are only a few concrete manufacturers and they are all way behind production just trying to keep up with China's demands.
Let's face it. No matter what, prices of just about everything is going to go up, and always has, until such time as something else changes, and even then, the lower prices are never to be matched again.
I get the sticker shock every time I go to buy just about anything. John