Comments on: Steel Futures Market Auto Suppliers’ Savior? http://www.thetruthaboutcars.com/steel-futures-market-to-stabilize-material-costs/ The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Sun, 22 Nov 2009 22:48:25 -0500 http://wordpress.org/?v=2.8.6 hourly 1 By: shaker http://www.thetruthaboutcars.com/steel-futures-market-to-stabilize-material-costs/comment-page-1/#comment-678882 shaker Wed, 13 Aug 2008 11:18:09 +0000 http://www.thetruthaboutcars.com/?p=62781#comment-678882 It's not the raw material, but the energy and transportation costs that are driving up steel prices. The problem with steel (even recycled scrap) is that the "cheap" import market has reduced domestic basic steel manufacturing to a trickle (compared to the 1970's). Now that now that transportation costs are getting high, there's no domestic capacity to take advantage of the higher costs of imports; we're still exporting steel scrap to China (and others) because we can't cook the stuff fast enough to meet domestic demand (so the price soars). This could lead to a small resurgence of the industry, which could stabilize prices. It’s not the raw material, but the energy and transportation costs that are driving up steel prices.
The problem with steel (even recycled scrap) is that the “cheap” import market has reduced domestic basic steel manufacturing to a trickle (compared to the 1970’s). Now that now that transportation costs are getting high, there’s no domestic capacity to take advantage of the higher costs of imports; we’re still exporting steel scrap to China (and others) because we can’t cook the stuff fast enough to meet domestic demand (so the price soars).
This could lead to a small resurgence of the industry, which could stabilize prices.

]]> By: Captain Tungsten (of GM) http://www.thetruthaboutcars.com/steel-futures-market-to-stabilize-material-costs/comment-page-1/#comment-678141 Captain Tungsten (of GM) Tue, 12 Aug 2008 23:11:42 +0000 http://www.thetruthaboutcars.com/?p=62781#comment-678141 @Samir: The difference is that steel isn't a limited resource, lots of appropriate rocks in the ground, and the scrap is 100% recyclable. Price stability might have staved off the worst of the steel bankruptcies of the late 90's. That would have left more of the domestic mills in the hands of domestic management. Yay us! That would also have left more of the domestic mills in the hands of somewhat flaccid management. Hmmmm.... I can argue both sides of that. @Samir: The difference is that steel isn’t a limited resource, lots of appropriate rocks in the ground, and the scrap is 100% recyclable.

Price stability might have staved off the worst of the steel bankruptcies of the late 90’s. That would have left more of the domestic mills in the hands of domestic management. Yay us! That would also have left more of the domestic mills in the hands of somewhat flaccid management. Hmmmm….

I can argue both sides of that.

]]> By: yasth http://www.thetruthaboutcars.com/steel-futures-market-to-stabilize-material-costs/comment-page-1/#comment-677981 yasth Tue, 12 Aug 2008 22:09:09 +0000 http://www.thetruthaboutcars.com/?p=62781#comment-677981 Eh futures regulate the market somewhat, but far more importantly they allow one to lock in prices. Even more importantly they allow smart companies to hedge their prices. Southwest did this to maintain profitability even as fuel prices rose to untold amounts. There are also advantages of demand streamlining etc. Eh futures regulate the market somewhat, but far more importantly they allow one to lock in prices. Even more importantly they allow smart companies to hedge their prices. Southwest did this to maintain profitability even as fuel prices rose to untold amounts.

There are also advantages of demand streamlining etc.

]]> By: tony-e30 http://www.thetruthaboutcars.com/steel-futures-market-to-stabilize-material-costs/comment-page-1/#comment-677821 tony-e30 Tue, 12 Aug 2008 21:14:53 +0000 http://www.thetruthaboutcars.com/?p=62781#comment-677821 I believe the key here is predictability. With a futures market in steel, nobody will be caught off-guard when the price gains <strike>25% </strike><strike>50% 100%</strike> 1000% in 12 months. I believe the key here is predictability. With a futures market in steel, nobody will be caught off-guard when the price gains 25% 50% 100% 1000% in 12 months.

]]> By: Samir http://www.thetruthaboutcars.com/steel-futures-market-to-stabilize-material-costs/comment-page-1/#comment-677752 Samir Tue, 12 Aug 2008 21:00:24 +0000 http://www.thetruthaboutcars.com/?p=62781#comment-677752 Yes, crude oil futures have done a great job at ensuring price stability of a limited resource for which demand is burgeoning. Yes, crude oil futures have done a great job at ensuring price stability of a limited resource for which demand is burgeoning.

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