Board-Ansicht
Mix-Ansicht- Update zur Lage am US-Stahlmarkt (ein beneidenswertes Stück Vernunft) - Bob, 11.11.2002, 22:45
Update zur Lage am US-Stahlmarkt (ein beneidenswertes Stück Vernunft)
-->Steelmakers Increase Prices
For U.S. Auto Manufacturers
By ROBERT GUY MATTHEWS
Staff Reporter of THE WALL STREET JOURNAL
U.S. steelmakers have won 5% to 10% price increases in long-term contracts with domestic car manufactuers, the first increase in at least seven years. A combination of trade restrictions on imported steel and lapses in production by bankrupt steel companies gave producers the leverage they needed to push through the increase.
Given the excess steel capacity world-wide, such an increase seems counterintuitive. But the success of steel companies to get car manufacturers to pay more reflects auto makers' reliance on a small number of specialized producers for high-quality-grade steel and the fact that the supply in the U.S. remains relatively tight. The world makes about 20% more steel than it consumes, but in the U.S. much foreign steel is kept out through tariffs and trade restrictions.
Unfortunately for the auto industry, one of their key suppliers of cold-rolled and coated steel was LTV Corp., which liquidated in December 2001 and whose operations were idled for four months, taking seven million tons of steel off the market.
LTV lost its business with car makers last year. And while the steel-making facilities have since restarted under a new company, International Steel Group, the company doesn't have a long-term supplier contract with the automotive industry. ISG is still trying to work out a union contract with the United Steelworkers of America and until it does, automotive companies are shying away from long-term contracts with ISG, fearing that a strike would interrupt their supply.
For the remaining auto suppliers, U.S. Steel Corp., AK Steel Holding Corp., Ispat Inland Steel Inc., the ability to force the automotive industry to pay more for steel comes at a time when car makers are increasing their relentless pressure on suppliers to lower costs.
The price increases are the strongest sign yet that President Bush's controversial steel tariffs that limited imported steel are enabling the industry to begin a long-term financial recovery. The hike in long-term contracts is especially needed given that the industry was beginning to see price increases for steel sold on the spot market begin to level off in the latest quarter.
Contract prices with automobile companies, including General Motors Corp., Ford Motor Co. and DaimlerChrysler AG are critical for steelmakers. It is one of their largest and most profitable markets. A typical automobile has about $700-$1,000 worth of steel.
This year about 23 million tons of the 77 million tons of steel made for the automotive industry was up for contract renewal, says Peter Marcus, steel analyst for Word Steel Dynamics. Most of that has been renegotiated at higher prices, according to steelmakers.
Negotiations between steelmakers and automobile makers are secretive and they rarely disclose the deals that they have made for competitive reasons. However, AK Steel acknowledged that it has won increases for automotive steel this year. In any given year, about one-third of its contracts come up for renewal."We have renewed a number of contracts in 2002 at higher prices," said Alan McCoy, spokesman for AK Steel. About 75% of AK Steel's steel business is tied to long-term contracts, as opposed to spot-market sales. The steelmaker provides steel to every major foreign and domestic automotive producer in the U.S., Mr. McCoy said.
Ispat Inland Steel said that it has won increases in its contracts that reverses the price declines of the last two years with the automobile makers.
Typically, contracts last one to three years and guarantee a price and tonnage amount. Steelmakers are eager to win contracts with their customers because it allows them the security of knowing how much steel to make. Depending on the price of steel negotiated, contracts help steelmakers when spot prices are low but hurt them when spot prices are high. Spot prices, by their nature, are volatile and change daily.
U.S. Steel said it doesn't comment on contract prices with its customers. This year, U.S. Steel is projecting a profit, the first since 1999.
Steel analysts say that they expect that in 2003, more contracts with the automobile makers will be negotiated with higher prices."We estimate that approximately 60% of U.S. Steel's contracts will be repriced in 2003 and will enhance earnings per share about 67 cents," said Wayne Atwell, steel analyst for Morgan Stanley & Co.
Since Mr. Bush last March limited the amount of foreign steel allowed into the country, steel prices have been on the rise, by as much as 80% for some key products. But those price hikes were tied to the spot market as opposed to the contract market. Many steelmakers, especially the financially troubled integrated steel companies, which make steel from scratch using iron ore and coke, weren't able to significantly tap into the spot market to take advantage of the higher prices. Most of their steel was under contract.
Likewise Japanese steelmakers and automobile companies, including Toyota Motor Corp., are expected to reach an agreement to hike the price of steel plate after a series of cuts of as much as 20% over the past three years. Japanese steelmakers have consolidated recently and used their leverage to pressure automobile companies.
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