Steel prices worldwide going up!
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JimMc
Platinum Member
A 20% retail price increase would require almost a 40% steel price increase. With that being said, however, your 20% may be closer than most would think, but because of some other factors in addition to the steel increases - at least in the U.S. Also, that increase will take at least a couple of years to reach the retail customer.
There will be some offset to the steel increases in the US because of the repeal of the 30% tariff imposed in 2003. But only some offset because the price increases will be more than the tariff was.
One of the largest factors in US pricing is freight. The retail customer pays the freight indirectly on all phases of production. From the raw materials to final finished goods delivery to the farm. Ever notice how trucks outnumber cars on the interstate? The new regs on drivers and fuel increases yet to come will see freight start edging towards $3.00 per mile in the next few years (it averages around $1.25 now). It is already cheaper to bring 40,000 lbs of freight (a typical semi load) all the way from China to port in the US than it is to take that same container from port to the east coast! The cost of steel is only put into the product 1 time. The cost of freight is added any time a raw material, cut part, subassembly, or finished good is moved, whether that move be in processing, material handling, warehousing, distribution, or delivery to the customer. So while raw material inputs do contribute to retail price levels, it is the inputs that are added at multiple levels, like freight and labor, that really drive prices up quickly. I guess to conclude, I think you may be close on your estimate of a 20% increase at retail pricing, but in my opinion that increase will be from the combination of inputs that occur on multiple levels.
There will be some offset to the steel increases in the US because of the repeal of the 30% tariff imposed in 2003. But only some offset because the price increases will be more than the tariff was.
One of the largest factors in US pricing is freight. The retail customer pays the freight indirectly on all phases of production. From the raw materials to final finished goods delivery to the farm. Ever notice how trucks outnumber cars on the interstate? The new regs on drivers and fuel increases yet to come will see freight start edging towards $3.00 per mile in the next few years (it averages around $1.25 now). It is already cheaper to bring 40,000 lbs of freight (a typical semi load) all the way from China to port in the US than it is to take that same container from port to the east coast! The cost of steel is only put into the product 1 time. The cost of freight is added any time a raw material, cut part, subassembly, or finished good is moved, whether that move be in processing, material handling, warehousing, distribution, or delivery to the customer. So while raw material inputs do contribute to retail price levels, it is the inputs that are added at multiple levels, like freight and labor, that really drive prices up quickly. I guess to conclude, I think you may be close on your estimate of a 20% increase at retail pricing, but in my opinion that increase will be from the combination of inputs that occur on multiple levels.
My 20% was a rough estimation. I'm not following steel prices closely as I'm not a manufacturer;-0. I am hearing from them that the price increase in the steel worldwide is about 20-25%. correct? This means a price increase of about 10-15% in finished product. With the increased current exhange rate of USD vs Euro, the currency taken as a reference more now in the world, I added 5-7% more in the prices based on USD. So, the total increase in prices of finished products can be estimated about 20%. (ps: 1 Euro=~1.27 USD today. It was 1.17 about a month ago.) So, it seems that in coming days/months the manufacturers in USA like you have a better chance in competing against the imported products, especially against products coming from Europe continent. You have disadvantages of other costs like transportation cost there, however.
Ps: the rumor I heard on why worldwide steel prices going up is that China is buying much much steels all over the world. You heard this rumor or is it true?
Ps: the rumor I heard on why worldwide steel prices going up is that China is buying much much steels all over the world. You heard this rumor or is it true?
chim
Elite Member
Jim, your info on shipping costs is right on with something I ran into just yesterday. A co-worker was going over shipping costs on a piece of used equipment he was looking into. It has to be shipped from Pennsylvania to somewhere in Hawaii. I forget the exact figures, but to send the ~400# item it was around $900. The sea leg of the trip was only something like $119. The shipper also said it's possible to ship it for less, if we could get it to weigh more(?). It seems there's a break of some sort as the weight increases.
As far as the steel prices, a recycler in a nearby city is paying 3 or 4 cents a pound for scrap right now. He says the "furriners" are snapping up a great deal of our scrap...............chim
As far as the steel prices, a recycler in a nearby city is paying 3 or 4 cents a pound for scrap right now. He says the "furriners" are snapping up a great deal of our scrap...............chim
wroughtn_harv
Super Member
For a friend of mine I got eighty dollars a ton (four cents) for punch press scraps. It blew me away because I'm used to thirty to thirty five a ton for steel.
There's two sides to that though. I also was charged a hundred and ten dollars for a five and a half foot piece of two inch solid stainless scrap, two dollars a pound. /forums/images/graemlins/smirk.gif
There's two sides to that though. I also was charged a hundred and ten dollars for a five and a half foot piece of two inch solid stainless scrap, two dollars a pound. /forums/images/graemlins/smirk.gif
JimMc
Platinum Member
We currently get $110 per ton for our scrap and they provide the trailers on site to collect it. They also haul at their expense.
As to price increases for European goods, 20% increase may be an underestimation because of the Euro over last year.
As to price increases for European goods, 20% increase may be an underestimation because of the Euro over last year.
spencer200
Platinum Member
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We have had a 20% increase on worksaver implements all ready this occured last fall because of the steel prices.
JTC
Bronze Member
Prices going up? Say it ain't so!
Raw steel is a relatively small percentage of the bottom line costs consumers pay for complex goods (tractors, automobiles...) and a higher percentage for simple goods (mower blades...) that have less labor content. An increase in the cost of steel would have a much higher impact as a percentage of the final cost on a mower blade than it would on an engine.
I would expect the steel content to contribute more than 5% - 10% of the final cost of a tractor. So, from this factor alone, the overall cost increase would be much lower than the increase in the cost of the raw steel.
Now it does not help that everything else is going up as well (energy, labor, transportation, other commodities...).
Jim
Raw steel is a relatively small percentage of the bottom line costs consumers pay for complex goods (tractors, automobiles...) and a higher percentage for simple goods (mower blades...) that have less labor content. An increase in the cost of steel would have a much higher impact as a percentage of the final cost on a mower blade than it would on an engine.
I would expect the steel content to contribute more than 5% - 10% of the final cost of a tractor. So, from this factor alone, the overall cost increase would be much lower than the increase in the cost of the raw steel.
Now it does not help that everything else is going up as well (energy, labor, transportation, other commodities...).
Jim
JimMc
Platinum Member
Correct. On our products, the 30% tariff on steel affected our customers price about 5% last year. Just this week, though, 2 of our major vendors announced price increases. One was 18%, the other could not even quantify the amount other than to say it was the largest they have ever had to pass on. It is very frustrating to work hard to improve your product and processes with the hope of increasing profits only to have it snatched away with increased component costs. But, hey, if it was easy everyone could do it. /forums/images/graemlins/grin.gif
John_Mc
Elite Member
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</font><font color="blue" class="small">( the rumor I heard on why worldwide steel prices going up is that China is buying much much steels all over the world. You heard this rumor or is it true? )</font>
It is true that a LOT of the scrap steel is going to China. This has driven up scrap prices in the USA. Since scrap steel is a major ingredient in most of the steel being manufactured in North America, it tends to have a strong impact on finished steel prices.
John Mc
(too many years in the steel wire industry...)
It is true that a LOT of the scrap steel is going to China. This has driven up scrap prices in the USA. Since scrap steel is a major ingredient in most of the steel being manufactured in North America, it tends to have a strong impact on finished steel prices.
John Mc
(too many years in the steel wire industry...)
