As analysts at MEPS International, a steel industry consultancy, predict, the "volcano eruption"-style steel price rose to its peak in eight years in March this year. A few days ago, experts in the US auto industry predicted that if the rising steel prices could not stabilize as soon as possible, it would lead to the bankruptcy of some American automotive suppliers.
U.S. steel prices soared at least 30% in the last two months and the current rally continues. Last week, the price of U.S. iron scrap rose to 300 U.S. dollars per ton, causing stamped iron and steel parts made of iron scrap to increase from 14 U.S. dollars per hundred pounds to present U.S. dollars.
Recently, automakers and large suppliers have signed long-term contracts with steel producers to avoid the impact of price increases, but some smaller suppliers do not have the ability to purchase such a large amount of steel. Some experts analyze that if steel prices remain high, then some suppliers will use up all their liquidity unless they can overcome difficulties through the help of automakers, otherwise they will face bankruptcy crisis.
Pete Peterson, head of automotive marketing at American Steel, said: "The cost of steel accounts for 65% of the manufacturing cost of stamped parts. If the supplier can't get help from the manufacturer by raising the price of its product, then it will be eliminated."
Although the Bush administration is using the withdrawal of import tariffs to ease the pressure of rising domestic steel prices, the huge tax cuts have not eased this situation. On the contrary, foreign steel producers have increased the price of steel in order to make up for the loss of the US dollar against other currencies.
"In order to solve the steel price issue, President Bush did adopt a corresponding tariff protection policy, but so far it has not made the steel prices stable." Plummer consultant Plummer of the United States, taking hot-rolled plates as an example, "current price is 500 per ton. The United States dollar, while the average price in the past 15 years is 310 US dollars per ton."
Some U.S. suppliers have formed a coalition to send a request to the White House to reduce the price of steel by limiting the export of steel scrap. Bob Stevens, the president of the federation, said that he was unprepared for the rise in steel prices, and that his company would spend an extra 10,000 dollars a day. At the same time, Stevens predicts that these additional costs will be doubled by the end of July this year. Stevens and his joint organization hope that the US Department of Commerce can use legal means to limit the export of US steel scrap in order to avoid shortage of resources. However, according to expert analysis, the Bush administration is unlikely to accept such a request to restrict exports.
At present, parts suppliers like Delphi have already felt the adverse impact of the steel price crisis. Last week, Delphi and the Ohio supplier negotiated prices. The counterparty forced them to meet the new price to fulfill the contract. The two previously signed contracts for sea transport of steel parts could not be realized.