US steel prices skyrocket with scarcity

Tuesday, June 18, 2002

Steel prices are skyrocketing in the United States due to the Section 201 safeguards imposed by President George Bush in March, Brazilian business daily Gazeta Mercantil reported.

Prices have increased more than 50% in the past two months and could even double, the paper said. Large consumers and distributors expect prices to remain high and even predict a scarcity of some products.

Importers announced they plan to increase purchases abroad before prices go up even further. Before the safeguards, a ton of steel cost US$190; now the same amount goes for US$300 and could reach US$400.

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All the products that were included in Washington's tariff-quota system, incuding duties as high as 30%, have seen their prices rise on the international spot market. Hot-rolled coils increased from US$195/t in January to US$295/t this month. Cold-rolled coils jumped from US$260/t to US$365/t in the same period; and rebars from US$215/t to US$227.

Research carried out by the American Institute for International Steel (AIIS) suggested that US importers will buy more finished steel goods at the expense of semi-finished products like slabs and billets.

The vast majority of executives included in the study predict a scarcity of some products such as steel slabs and hot and cold-rolled plates.

"There is a certain exaggeration, probably caused by the impact of steel prices in international markets. In truth, there is unused capacity in the world steel sector of at least 60Mt, that is, more than double Brazil's production of 27Mt," Germano Mendes de Paula, an economist specializing in steel at the Universidade Federal de Uberlandia was quoted as saying.

Higher prices, he said, could stimulate inefficient steel mills to begin producing again, thereby accentuating price cycles for the product.

The US this week announced the exemption of another 47 items from the list of steel products affected by the import quotas-tariffs, but Brazil was not one of the countries that benefited. Another 61 items were exempted last week, but accounting for less than 1% of US steel imports.