Thursday, April 24, 2008

Steel Is Not a Steal

It looks like rail. If you hit it with a hammer, it would sound like rail. If it got up and walked, it would walk like rail. And, if it could speak, it would even talk like rail!
But today, what looks like rail is acting more like gold! Why? Steel is becoming much more expensive, and the increases are coming faster than a speeding TGV!

Doesn't take a railroad expert to know that steel is a HUGH component of the business. In spite of that, the paradigm is that steel, in all of its forms, is always there, and will be there at a reasonable price. That paradigm is gone, maybe for a good, long time. Recent steel price increases are significantly affecting the way things will be done.

Steel suppliers have raised prices twice in the past four weeks. They promise to raise prices again before another four weeks have past. Suppliers who provided material with a guaranteed price for three months are now guaranteeing a price for no more than fifteen days!

Steel components in trackwork, that area that interests Rip, are significant. Rails, spikes, bolts, tieplates, anchors, all have gone up in price as a result. No one is waiting for their old inventory to be depleted, either. It's like the price of gasoline going up when the price of crude goes up, even though the gas in the neighborhood station's tanks were there the day before. But something interesting is happening above and beyond all that we acknowledge to be true.

Certain end users, notably Agencies and Contractors, are now forced to accept prices much, much more quickly than the time frame that they have known in the past. No more playing the "your cost is too high, we are going to the competition" game. Suppliers are telling customers, "If you don't take this price within days, the next price will be much higher!" Suppliers know that their competitors are going to do the same thing. Pay me now, or pay me alot more later! Ah, there's a new paradigm! Let's see what changes occur over the next months and years.


At 4:37 PM, May 16, 2008, Anonymous Anonymous said...

Rip as rr track contractor, I know about these steel prices. What's your 3 to 6 month forecast? I don't think buyers can or have the time to be choosy.Just spoke with a supplier and they indicated they have no relay in stock, they are quoting me brand new rail. Crazy!

At 11:03 AM, May 20, 2008, Blogger Rip said...

Ol' Rip is not good at forecasting, just ask my broker! But, from what discussions I have been involved with, I believe steel will still go up at least slightly in the 3 to 6 month timeframe. Off-shore forces are also at work in this market and are hard to predict.

I also believe that if there is a leveling off in the Fall of '08, that steel price increases will resume again in the Spring of '09. Any reduction in oil pricing should have no impact here.

Have you noticed that suppliers are placing expiration dates of thirty, or even fifteen days, on their quotes involving steel? Looks like they believe that steel will be more expensive in the three to six month time frame, too!


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