Posted on: Sunday, April 25, 2004
China's appetite for steel biting U.S. factories
By Ilene Aleshire
Knight Ridder News Service
FORT WORTH, Texas — China began buying huge quantities of steel on world markets last year, sending prices higher. As a result, the Mansfield school district is looking for ways to use less steel in seven schools it plans to build; a Fort Worth appliance dealer is gloomily awaiting price increases; and Pier 1 Imports is trimming the size of furniture it imports from Asia.
China's voracious appetite for steel to build roads, ships, factories and other things is eating into worldwide supplies. Like a rock thrown into a pond, it has sent ripples across the global economy, and the effects are reaching the United States.
"Steel is the ultimate nuts-and-bolts issue," said Dick Johnston, president of Trinity Forge in Mansfield, Texas, which makes valves and bits for the oil and gas industry. Since so many products have steel in them, he said, "everything in our society has just gotten more expensive — and people need to be prepared for that."
Johnston said prices for steel, depending on the grade, have risen 15 percent to 60 percent this year, with no end in sight.
"I'm telling everybody I know, 'If you're planning to buy anything made out of steel, buy it now,' " he said. "We've never seen anything like this in our lifetime."
Manufacturers are bearing the brunt of the higher costs so far, but the price of steel is likely to be passed on to consumers.
Appliance makers are complaining that scrap steel is in short supply and exceedingly expensive.
Pier 1 Imports buys wicker and steel furniture from Asia. With steel prices rising by the week or even by the day, some furniture will be redesigned so it's a little bit smaller and uses less steel, said Chief Executive Marvin Girouard.
Girouard said he's happy Pier 1 began work on its new Fort Worth headquarters when it did. If construction had started eight to 10 months later, the complex would have cost at least 20 percent more, by some estimates.
Anyone trying to get a development off the drawing board today is not as fortunate.
John Avila Jr., president of Thos. S. Byrne construction, said prices quoted for steel by suppliers are only good for seven to 14 days. And that is happening throughout the country. "This is very, very abnormal," he said.
Rick Cash, assistant superintendent for operations in the Mansfield school district, said volatility in the steel market is pushing bids up.
"They are certainly not going to guess on the low end," he said. "They're going to go on the high end."
Cash said he had heard originally that steel prices probably would peak this summer, but now he's not so sure. "We've been watching this with great concern," he said. "Most of our budgets are set on estimates made prior to this."
Eric Harwit, a professor of Asian Studies at the University of Hawai'i, said that China, unlike most Western nations, is still building its infrastructure. And it will take 25 to 30 years to reach the stage of an industrialized country, Harwit said. And China's factories need steel for cars, trucks and other products to meet escalating demand.
Some want the federal government to help. The Emergency Scrap Steel Coalition — a group founded by the head of an Indiana forge — is asking the U.S. government to restrict exports of steel scrap, as some Eastern European countries have done, said Trinity Forge's Johnston.
Representatives of the forging industry also have asked the federal government to turn the "ghost fleet" of World War II ships into scrap.
Trade groups representing general contractors and building contractors have asked the government to set reserves for steel, Avila said.
"We're running around here like chickens," he said. "Something's got to be done to address this."
