{"id":202853,"date":"2021-05-27T14:27:49","date_gmt":"2021-05-27T18:27:49","guid":{"rendered":"https:\/\/www.thedetroitbureau.com\/?p=202853"},"modified":"2021-05-27T14:27:50","modified_gmt":"2021-05-27T18:27:50","slug":"carmakers-face-new-pressure-due-to-rising-steel-prices","status":"publish","type":"post","link":"https:\/\/thedetroitbureau.com\/2021\/05\/carmakers-face-new-pressure-due-to-rising-steel-prices\/","title":{"rendered":"Carmakers Face New Pressure Due to Rising Steel Prices"},"content":{"rendered":"\n

The shortage of semiconductors<\/a><\/span><\/strong> that has sliced automobile production around the world during the last six months is a fact of life to which car makers have had to adjust.<\/p>\n\n\n\n

\"BMW
Steel prices have jumped four-fold in recent months, adding to the issues automakers are facing.<\/figcaption><\/figure><\/div>\n\n\n\n

John Lawler, Ford Motor Co.\u2019s chief financial officer, told analysts this week the company has no reason to adjust its earlier guidance that the shortage of semiconductors \u2014 many of them made in a single plant in Japan that was shut down for seven weeks due to a fire \u2014 could force the company to reduce its production by as much as 50% in the second quarter.<\/p>\n\n\n\n

Now carmakers are facing rising prices \u2014 and possibly shortages \u2014 of another key material: steel, which just like semiconductors, is used by every single carmaker, putting more upward pressure on vehicle prices.<\/p>\n\n\n\n

Steel prices rise dramatically<\/h2>\n\n\n\n

After bottoming out around $460 per ton last year, the benchmark hot-rolled coil steel, the steel widely used for automobile and truck body panels, has climbed to approximately $1,600 a ton, according to various indexes of steel prices. The current is nearly triple the 20-year average.<\/p>\n\n\n\n

\"BMW
Car companies use steel for a variety of applications.<\/figcaption><\/figure><\/div>\n\n\n\n

Like the price for other commodities, the price of steel has increased 60% this spring as the economies in China and North America and parts of European Union have come back to life in the wake of the pandemic. So far steel prices have gained nearly 60% in 2021. It\u2019s helped that steel companies cut back on production during the pandemic, making the metal just one more commodity currently experiencing high demand at a time of low supply, analysts observe.<\/p>\n\n\n\n

Of course, steel prices can\u2019t go up forever, and history suggests they are nearing a peak. Since the start of the millennium, there have been four previous steel surges \u2014 in 2004, 2008, 2016 and 2018 \u2014 in which prices rose between 37% and 84%, according to Bank of America analyst Timna Tanners, who noted the price surges all soon faced.  <\/p>\n\n\n\n

However, analysts, who follow the steel industry, are debating whether prices will come down or whether the price hikes will prove more durable, leaving the price for benchmark products such as hot-rolled coil steel at a higher level. <\/p>\n\n\n\n

\"\"
Demand for steel-intensive pickup truck is problematic for automakers.<\/figcaption><\/figure><\/div>\n\n\n\n

Steel makers love tariffs<\/h2>\n\n\n\n

Meanwhile, capacity utilization in the steel industry in the United States has climbed from just under 50% a year ago to 79.6%, according to an article in Northwest Indiana Times in the heart of one of the country\u2019s major steel producing regions and closely aligned with the auto industry.<\/p>\n\n\n\n

Paul Jacobson, GM\u2019s chief financial officer, acknowledged last month rising material costs not connected to the semiconductor shortage are a major headwind for the company.<\/p>\n\n\n\n

Tariffs, which the Trump administration boosted by 25% in 2018, also have played a key role in the rising prices for steel products. So far, however, the Biden administration has been slow to roll back the tariffs.<\/p>\n\n\n\n

\"\"
Several organizations sent a letter to President Biden to imploring him to keep steel tariffs in place.<\/figcaption><\/figure><\/div>\n\n\n\n

Seven of the leading groups representing the domestic steel industry and labor today urged President Biden to ensure steel tariffs, put in place in 2018 to protect national security, are preserved.<\/p>\n\n\n\n

The American Iron and Steel Institute, United Steelworkers union, Steel Manufacturers Association, the Committee on Pipe and Tube Imports, Specialty Steel Industry of North America, American Institute of Steel Construction and Alliance for American Manufacturing released a letter they sent to Biden urging him to keep the tariffs in place.<\/p>\n\n\n\n

\u201cEliminating the steel tariffs now would undermine the viability of [the American steel] industry. Opponents of the steel tariffs argue that they should be eliminated to increase supply, given the current environment of rising prices and long lead times,\u201d the letter stated. <\/p>\n\n\n\n

\u201cThis ignores the fact that the COVID-19 pandemic has posed unprecedented, but temporary, challenges to global supply chains in many industries \u2014 including lumber, semiconductors, concrete, agricultural products and cleaning products \u2014 as manufacturers respond to rapid and unpredictable shifts in customer demand and logistical difficulties. The same is true for steel, the letter stated.\u201d<\/p>\n\n\n\n

The groups note that \u201cdomestic steel supply is responding to market signals.\u201d Steel production has increased by more than 50% in the last year and steel mill employment has increased by nearly 3,000 since September. <\/p>\n","protected":false},"excerpt":{"rendered":"

Automakers are facing a new headwind: steel prices. Much like gas prices, the price of steel has risen four-fold as demand has increased significantly. Car companies are hustling to meet the wants of consumers for full-size pickups. However, steel supplies were low due to the pandemic and now they\u2019re hustling to fill orders. Get the full story at TheDetroitBureau.<\/p>\n","protected":false},"author":20009,"featured_media":202854,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","footnotes":""},"categories":[7,8,5],"tags":[780,779,782,781,344],"make":[],"post-state":[335],"category_old":[],"acf":[],"_links":{"self":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/202853"}],"collection":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/users\/20009"}],"replies":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/comments?post=202853"}],"version-history":[{"count":4,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/202853\/revisions"}],"predecessor-version":[{"id":202859,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/posts\/202853\/revisions\/202859"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media\/202854"}],"wp:attachment":[{"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/media?parent=202853"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/categories?post=202853"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/tags?post=202853"},{"taxonomy":"make","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/make?post=202853"},{"taxonomy":"post-state","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/post-state?post=202853"},{"taxonomy":"category_old","embeddable":true,"href":"https:\/\/thedetroitbureau.com\/wp-json\/wp\/v2\/category_old?post=202853"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}