After a decade of abundant steel availability and declining prices, equipment manufacturers have been facing an ongoing steel crisis since 2004, largely due to China's insatiable demand, said the report, Steel Markets: Cause and Factors Affecting Steel Prices in the Near and Medium Term.
The report's authors said it was not the consolidation of the steel industry that set the trend for increased prices. In 2004, prices of almost every type of steel doubled in price, with several recording increases of more than 250%, the Global Insight report said.
"Price would have increased in 2004 no matter how many steel companies there were, for the real issue was ore and coke supply, not furnace capacity," it said. "However, as raw materials supply normalises and prices begin to decline, consolidation will have a major effect in slowing the pace of decline, and most importantly in putting a floor under prices."
As well as explosive growth in the Chinese steel industry straining global supply and lifting prices worldwide for steel-making raw materials, the decline in steel prices over the two previous decades led to under investment in mill maintenance and new mines/facilities for raw materials. The depreciation of the US dollar, tariffs on imported steel, increased prices for scrap, and stronger industrial production in the US, Europe and Japan were also singled out.
Equipment manufacturers have not been able to pass on most of these costs and profits had suffered as product demand grew, said the three associations, the Association of Equipment Manufacturers (AEM), the Farm Equipment Manufacturers Association (FEMA) and the North American Equipment Dealers Association (NAEDA).
AEM is the North American-based international trade group for the off-road equipment manufacturing industry. Among its members, AEM numbers more than 700 companies that manufacture equipment, products and services used worldwide in the construction, agriculture, forestry, mining and utility fields.
FEMA enhances business opportunities and profitability to members by providing a forum for marketing short-line equipment through networking, communications and technology, and a forum for purchasing materials and services.
NAEDA provides education, finance, industry relations, legal assistance and legislative services to more than 4500 retail agricultural, industrial and outdoor power equipment dealers in the US and Canada.
"The steel problems our industry currently faces and has been for some time now are the result of a 'perfect storm' of issues", they collectively said.
ConstructionEquipmentNews.net
