Steel-Price Increases Creep Into Supply Chain
Author: Robert Guy Matthews</br></br>The impact of escalating steel prices in the U.S. is starting to filter through supply chains, with companies that buy and process steel raising their own prices, stockpiling in advance of possible more increases and boosting volume to offset rising costs.</br></br>Steelmakers have increased prices six times, for a total increase of 20% to 30%, since November on basic flat-rolled steel, used in everything from cars to toasters, to offset higher input costs of raw materials, such as iron ore and coal. Higher costs for steel, which are expected to continue well into this year, are hitting bottom lines of companies and prompting additional price increases.</br></br>Caterpillar Inc., the world's biggest maker of construction and mining equipment, expects higher sales volumes and possible price increases on its own product to offset higher steel costs which represent less than 20% of its material cost. It also buys materials in advance when it expects prices to rise. "We are always looking ahead," said Chief Financial Officer Edward Rapp.</br></br>Emerson Electric has been increasing prices to its customers, redesigning some products and evaluating production processes to counter higher material expenses, which cost the company twice as much as anticipated and contributed to lower-than-expected profit from the quarter ended Dec. 31. Appliance makers like Whirlpool Corp., too, are feeling the pinch and have announced price rises of 8% to 10%, although those full increases may be hard to pass on without losing market share to foreign rivals.