Soaring Steel Prices: What can Door Dealers Expect?

It began with a few modest increases — 10 percent here, 15 percent there. But by April, manufacturers who rely heavily on steel were feeling the pinch. In just three months, steel costs had risen more than 30 percent. And it’s not just steel, but also the raw materials that go into making the steel.

Several reasons for the increase have bounced around in the media and in company boardrooms — a weak American dollar, surging ocean-freight costs, an increase in exports from domestic steel mills and strong markets in foreign countries.

At the time of this writing in April 2008, manufacturers were bracing themselves for two more huge increases: one in June, followed quickly by another in July, bringing the total increase to about 50 percent in just seven months.

While the volatile steel market is reminiscent of what happened in 2003-04, there are some subtle differences. At that time, the sudden jump in price was attributed to supply and demand — there simply wasn’t enough steel to go around. Foreign countries such as China were gobbling up steel at a rapid pace. Now, there’s plenty of steel — so far — but at a higher price. Whether or not a shortage comes into play will be determined in the months to come.

However, there are also some similarities — the aforementioned ocean-freight costs to transport steel into the United States, the rising costs of energy and a weak American dollar.

Builders, developers and suppliers of steel have been hit the hardest. During the ’04 crisis, many of them lost business and chunks of money. Some tried to absorb the increases rather than pass them on to the customer; others were locked into contracts and unable to raise prices. Some simply slowed or stopped production until steel prices leveled and became more affordable.

Despite the soaring costs this time around, most builders and developers remain optimistic, knowing rough waters are definitely ahead, but calmer seas will prevail by the end of the year. We caught up with a handful of builders and developers to get their perspectives on the explosive steel market. On the panel were (in alphabetical order):

Bob Boilini, systems sales manager, Components Plus Inc.
Vern Cannon, owner, Cannon Storage Systems
Chip Cordes, vice president, U.S. Door & Building Components
Scott McHugh, general manager/sales USA, MBCI
Buster Owens, president, Rabco Corp.
Mike Parham, CEO, NDS Construction
Phillip Wilkerson, vice president/manufacturing, components division, MBCI
Caesar Wright, president, Mako Steel Inc.