The rising cost of steel was an oft-voiced concern shared by suppliers and whole- good manufacturers at the Farm Equipment Manufacturers Assn. annual meeting in Kansas City in April.
Several manufacturers shared how the price of steel had risen 25% or more since January, with another 10% rise expected in the near future — as the industry starts building once again.
“Last year, all the manufacturers cut their inventories down to zero,” one steel supplier told Ag Equipment Intelligence. “All the steel-making input costs — iron ore, coal, scrap — have been up the last 3 months, and demand is picking up again now that orders are coming back.”
JP Morgan analyst Ann Duignan sees rising input costs, steel in particular, as a major issue confronting equipment manufacturers in the near term. “Key head winds for operating leverage are rising input costs vs. lack of pricing power,” she said recently in a note to investors.
JP Morgan’s commodity analyst also expects a 65% increase in iron ore prices in 2010, followed by another 10% increase in 2011. Cold rolled steel prices, which are already up 50% year-to-date, are likely to follow iron ore prices. Additionally, copper prices are up 74% since the beginning of the year.
— Ag Equipment Intelligence, April 2010