Why the Run-Up in Steel Prices?
Demand for steel has increased significantly because China increased its consumption by 38 million tons in 2003, or roughly 36 percent of the world’s steel consumption. This approximates the combined demand of Canada and Mexico. Due to its increased demand, China has been buying US scrap steel, bidding up the price of a key input in the manufacture of hot-rolled steel. Other factors contributing to the higher price of steel include: • A weak US dollar, which increases the price of imported steel in the United States and also increases US steel makers’ interest in exporting steel • Rising energy prices, which strongly affect energy-intensive industries such as steel making • A fire in a West Virginia coal mine in 2003, which reduced coke output • An ill-prepared U.S. steel industry Prior to December 2003, the U.S. government had import tariffs that ranged between 24 and 30 percent on steel manufactured in low-production-cost countries. The tariffs inhibited steel consumers from forming
