Prices up, profits down

A new US study into steel prices found that equipment manufacturers were “generally not able to pass on most of the [steel price] increases, and suffered declining profits even as their demand grew strongly”.

The study for the Association of Equipment Manufacturers (AEM) and two other US trade groups–carried out by Global Insight, Inc.–said off–road equipment suppliers saw steel prices double in 2004, with some recording increases of more than 250 %.

Causes of the rises included large increases in demand in China, under–investment in mining and steel mills, depreciation of the dollar, and higher scrap steel prices. “The problems our industry currently faces are the result of a ‘perfect storm’ of issues”, said the associations.

The steel sector is adding capacity to reduce the supply problems. The study warned, however, that a similar price hike might arise in the medium term as a result of strong industrial growth in India.