PITTSBURGH — As cheaper foreign steel imports are being hit with new tariffs, U.S. mills are raising prices to meet increased demand for domestic steel.
Pittsburgh-based U.S. Steel and other companies say they are not taking advantage of the pressure on foreign mills created by the Bush administration’s tariffs, but reacting to the market, where supplies are limited as the improving economy increases demand.
Average prices, which had sunk to 20-year lows, remain far below what they were in years past, they say.
According to Purchasing Magazine, which tracks steel prices, the average for hot-rolled steel has risen to $260 a ton, compared with $210 a ton three months ago. In 1980, the average price was $361 a ton.
“We’re trying to basically recover some of the pricing that’s been lost,” said Michael R. Dixon, a U.S. Steel spokesman.
A weak economy last year caused steel users to dip into inventories rather than buy new steel, said Charles Bradford, an analyst with Bradford Research in New York.
With reserves depleted, steel users now find themselves forced to buy at higher prices.
“There’s suddenly a lot less supply of steel available,” Bradford said.
And fewer companies making it. When LTV Corp. idled mills in December, it reduced capacity by about 6 million tons a year. A total of 15 million tons in annual capacity have been lost in a recent wave of bankruptcies; about 30 mills have gone under since 1998.
Michael Siegal, chairman of Olympic Steel, an Ohio company that gets steel from mills to manufacturers, said he has also heard reports of companies rationing steel to buyers, though he hasn’t encountered it.
He said he’s had no trouble finding steel for customers — as long as they’re willing to pay more.
“I was taught a long time ago, there’s never a shortage of steel to buy, only a shortage of steel to buy at the price you want,” Siegal said.
U.S. Steel said it is not rationing steel to customers, but Elizabeth Kovach, a spokeswoman for Bethlehem Steel, acknowledged that customers are being told it will take about twice as long to fill some orders as this time last year.
“That’s rationing to me,” Bradford said, which prompts customers to order more steel than they need.
“It’s a very bad situation because everybody loses,” Bradford said.
It remains to be seen how much of the higher price users will pass on to customers.
Some analysts believe the higher domestic costs and reduced availability of foreign steel could drive manufacturers out of the United States and into countries exempt from the tariffs, like Mexico and Canada.
Robert Crandall, a senior fellow at The Brookings Institution, a liberal Washington think-tank, said he doesn’t expect big automotive or appliance manufacturers to leave, however.
“Those people don’t pick up and move overnight,” he said.
Crandall predicted that increased prices and reduced foreign competition would lead to more so-called minimills, which operate by melting scrap steel rather than producing the metal from iron ore and tend to use nonunion labor.
Minimills, he said, can be built for less and can make steel cheaper than companies such as U.S. Steel, Bethlehem Steel and LTV.
“They can build a plant and produce sheet steel for about $200 a ton in about two years,” he said. He added that half of steel production is from minimills.
“The big guys are dying,” he said.