Steel in demand

Heavy steel demand by China has brought on what some say is a scrap steel crisis - a phenomenon that is being felt locally.

Agriculture and construction are two of the biggest industries in the area, and they're also some of the biggest steel users.

Lately, businesses have had to pay more for steel because they're competing with overseas buyers. China, in particular, has been buying up the scrap to increase its steel production for construction of high-rise apartments and dams.

Closer to home, the price of steel has led some to put off work around the ranch.

"Because of the drastic increase, people have put off doing some of things they would have considered doing," said Richard Wood, owner of Lizzy's Hay, Feed & Tack Iowa City Ranch, on Iowa City Road.

A roll of fencing wire has gone up for him from around 20 percent to 40 percent since January.

Flat steel panels are up 15 percent to 40 percent.

Wood said he has had people return steel panels they have purchased, because they ran out of money to do the rest of the job.

"In January, we sold a fair amount of panels," Wood said. "In February, we sold a reasonable amount. In the last four to six weeks it's tapered off because the cost is up."

Richard Lovell, president and general manager of Yuba City Scrap and Steel on Colusa Highway, said hot-rolled steel prices have gone up 30 percent since September.

The reason, Lovell is told, is that China is buying up all the scrap steel for its construction boom.

"Our steel mill says it's supply and demand," Lovell said.

Lovell said he's been told by the mill that prices are stabilizing. Prices aren't better, but they have not been escalating, either.

It's an economic phenomenon that some are calling a steel scrap export crisis.

The supply and pricing situation became so dire that by March 1, 300 U.S. companies and associations had joined the newly formed Emergency Steel Scrap Coalition, a Washington, D.C., group of steel consumers and others that is examining the effects of scrap steel prices.

U.S. Commerce Department and American Metal Market figures on the coalition's Web site show U.S. scrap exports have nearly doubled since 2000, reaching 11.9 million tons last year. China is the biggest consumer, buying 3.5 million tons last year, up from 1.2 million in 2000.

Prices for No. 1 heavy melt scrap have more than doubled, shooting up from $77 per ton in early 2001, to $156 per ton in December 2003. And spot prices for scrap that is melted to make steel have reached unprecedented levels - as high as $300 per ton, according to the coalition.

The unavailability of steel scrap results in sharply higher prices for steel products such as sheet steel, plate, structural steel beams, reinforcing bar and finished bar products. Two mainstays of the U.S. economy, construction and auto manufacturing, face direct harm from sharply higher scrap prices, the coalition says.

Steel is also used in agriculture to build farm machinery, fencing, outbuildings and equipment.

Lovell isn't going so far as to call it a crisis.

But it's not something that's very good for his business, even though he has been busier because people are stocking up out of fear they might run short. He can't pass along all the price increases for inventory, and shopping around means more work, just when he is in the midst of moving to a new location on Garden Highway, the former H&B Machinery location.

Luckily, he put his name in early, back in September, when prices starting heading up. But some of his orders got canceled anyway.

The prices certainly aren't good for his customers.

"It's a domino effect," Lovell said. "We actually don't raise it as much as the steel mill, percentage-wise, because you can't. So we eat some of it. The welding shops and fabricators, they eat some it, because their customers are complaining."

Appeal-Democrat reporter John Dickey can be reached at 749-4711. You may e-mail him at john_dickey@link.freedom.com.