The turbulent steel industry is getting a closer examination in a new study commissioned by three major off-road equipment manufacturing associations.
Global Insight, an economics consulting firm, prepared the report titled “Steel Markets: Causes and Factors Affecting Steel Prices in the Near and Medium Term” to detail the causes of recent price increases, both cyclical and permanent, and the impact of these factors on agricultural and construction machinery makers and dealers.
John Anton, principal economist for the report, said the information attempts to summarize the issue. He said a key issue was the study’s focus on the long-term issues affecting the steel industry.
“You have to factor the rise of India into your plans,” he said.
The off-road equipment manufacturing industry is a major consumer of steel. In 2004, prices for almost every type of steel doubled, with several recording price increases of more than 250 percent. “There was never a year like 2004 for the steel industry,” Anton said.
But the reasons behind last year’s price explosion are varied. The study cites the boom in China, a lack of raw materials, a weak U.S. dollar and the 2002 “Section 201” steel tariffs as principle causes.
Nick Yaksich, vice president of global public policy for AEM, said the study could help policy makers determine where to focus their efforts to address the issue.
“I don’t think there are really any surprises to those in the equipment industry who are living with it [steel price increases] day-to-day,” Yaksich said.
Policy factors that could have an effect on future steel prices include further devaluation of the dollar, continued steel industry consolidation and various steel trade protection measures, according to the study.
Anton said if anything, the study could help brace equipment manufacturers for future steel price shock: “[It’s basically] what was the license plate of the truck that hit us, and will we get hit again?”
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