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MARKET PLACE
Raw Material 'Inflation' To Add Impetus
To Steel Hikes: Timken
NEW YORK -- The rising costs of raw materials
will keep showing up in steel product prices in 2008, but
end-users in most industry segments are well positioned to
absorb the increases, according to Ward Timken, chairman of
Timken Co., Canton, Ohio.
"We're looking at tremendous volatility
for scrap prices in 2008," Timken said, citing continuing
Chinese demand for U.S. scrap as a major factor behind price
increases. U.S. domestic prices for some industrial scrap
grades jumped as much as $90 a ton earlier this month.
Prices of other raw materials, such as iron ore,
are likely to be "universally higher" in 2008, and
this will inevitably lead to inflated prices of steel end
products, he said, speaking in his capacity as chairman of
the American Iron and Steel Institute (AISI), Washington.
The steel industry is being forced to pass rising
raw material costs onto customers after several years in which
companies kept higher costs on their own books, Timken said.
"In 2005, 2006 and to a certain extent in 2007 (steel)
companies were eating up the higher costs. They can't do that
any more," he said. "Sooner or later it will have
to translate into higher product prices."
Customers such as original equipment manufacturers
aren't happy with the price increases, Timken said, but have
to accept that they are justified.
We're in a stand-off right now, but someone's
got to win," he added. Steel prices have risen sharply
in recent months, with U.S. mills pushing through several
consecutive monthly price increases. Global steel prices also
have been rising.
Despite higher steel prices and concerns over
the health of the wider economy, Timken said most steel end-use
sectors have good prospects for the year ahead, which should
translate to another positive year for the steel industry.
"Anything touching oil or gas, for example, will be good.
I don't see demand for oil or natural gas going down significantly
for 100 years," he said.
Problems could arise for the steel industry if
customers' cash flow starts to shrink, Andrew G. Sharkey III,
AISI's president and chief executive officer, said. However,
he added that there were no signs of that happening to a large
extent. "We're watching the liquidity of our customer
base. If operating capital starts to dry up that would be
a worry," he said.
Source: American Metal
Market, January 23, 2008
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