Steel Prices Are Set To Rise
Posted by
Dan Storey on Thu, Apr 15, 2010 @ 10:10 AM
According to many industry experts, steel prices are set to soar in the next 12 months, and it could have an impact on everyone. Naturally, this will leave many people asking, “How is this going to affect me?”
In the material handling, distribution and warehousing industries, steel price fluctuation has a huge impact on the price of new and used storage equipment. Pallet rack uprights, beams, shelving, mezzanines and wire decking are the main components of the material handling world, and all are made from steel. What this means is that even products that don’t have steel in them will still be stored in warehouses and distribution centers that are built with steel based products. Therefore, their costs will rise, which will mean they will have to charge more for their goods and services. All of this is going to trickle down to the consumer level, and the end result will be an increase in general prices of consumer goods.
We are seeing an increase in quoting activity due to this steel price concern. Due to projected demand and current low inventories we recommend identifying your needs for any new and used material handling equipment as early as possible. We are already seeing manufacturers decrease the amount of time you have to respond to a quoted price because they are anticipating the increase in steel prices. It is in everyone’s best interest to be proactive and purchase any storage equipment that will be needed over the next 6-9 months as soon as possible.
Why could this happen? Iron ore is the main ingredient in steel. A few weeks ago, mining companies Vale and BHP Billiton struck a deal with Japanese and Chinese mills to end the 40-year old benchmark system of annual contracts and lengthy price negotiations. Under the new system, iron ore prices will be negotiated quarterly. The general consensus seems to be that this switch will see iron ore prices continue to rise over the next 12 months, and there does not appear to be an end in sight. This hike in iron ore costs will have an immediate impact on the price of steel. The overall cost of steel based consumer products such as automobiles, household appliances, and everything in between will be subject to rising costs. The end users of these products could ultimately be the ones paying for this increase in iron ore and steel prices. Time will tell…