Shoppers may soon feel rise in steel price
By Greg Schneider
Washington Post
As steel prices continue to rise, appliance maker Whirlpool Corp. has tried to fight back. It went to court and won a temporary restraining order preventing a steel supplier from raising prices above a contracted amount.
But Whirlpool had no long-term contract covering the price of stainless steel, which also has climbed, so recently the maker of refrigerators, dishwashers and ranges raised its own prices by 1.5 percent to 2 percent on appliances containing stainless steel.
When the price of steel spiked this year, many manufacturers were stuck absorbing the full impact. But steel prices have continued to run high, and demand is up, so the cost increases are beginning to creep toward the consumer. Makers of construction materials, kitchen appliances, heating and cooling systems and other products with high steel content are raising prices for their distributors. Some economists think that could be an early sign of inflation.
Shoppers have yet to see much effect, though pressure is mounting on retailers to raise prices. Home Depot Inc., for instance, has seen prices jump on merchandise containing steel but "continues to use its scale and buying power to minimize price increases" for consumers, according to a statement the company sent to store managers.
As the Federal Reserve Board considers when to raise interest rates in the coming weeks, the price of steel — and how that flows through to finished goods — is likely to factor into the equation, said James Paulsen, chief investment strategist at Wells Capital Management.
"It's starting to spook the bond market, for sure, and I think it's on the Fed's discussion table," Paulsen said.
In May, the spot price of hot-rolled steel was up 114 percent over the same month last year, according to Tom Stundza, a metal markets expert at the trade magazine Purchasing who has surveyed steel buyers. Cold-rolled was up 74 percent, and steel plate was up 114 percent on the spot market, Stundza said. Experts expect prices to decline this summer, but to remain at a higher level than last year.
Whirlpool competitor Maytag Corp. recently announced a major corporate restructuring, including cutting 20 percent of its salaried work force, which it blamed on declining sales and rising steel prices. The company also has raised prices on its products because of the cost of steel, a spokeswoman said.
Auto-parts supplier Delphi Corp. won a temporary court order earlier this year against one of its steel suppliers and reached an out-of-court settlement. Overall, the company has paid 30 percent to 50 percent more for steel since the beginning of the year, said spokesman John Anderson. Delphi has been unable to pass the increases on to the companies it supplies in the auto industry, which have steadfastly refused to budge on pricing.
"The auto industry is feeling the pressure, too, because of the competitive pressure of the marketplace," Anderson said. "Everybody's trying to cram more sales into an ever-more-crowded marketplace, and prices aren't going up any."
Many buyers are mystified by the prices, Stundza said, because the factors propping them up aren't as clear as they were a few months ago. "Right now it's really a mess," he said.
Earlier this year, steel prices were being pushed up by huge demand from China and big increases in the cost of scrap metal, a major source of steel. Producers tacked surcharges onto steel shipments to cover those costs.
In the past two months, though, China's government has imposed a slowdown on the country's runaway industrial growth, and the price of scrap — which is easier to get and process in the warm months — has leveled off and even declined.
During that time, many steel producers eased off on surcharges but increased base prices.
