NEW YORK -- Steel prices are falling fast, promising quick relief for some automotive suppliers and setting the stage for a battle between automakers and major steel makers over next year's contracts.
In the United States, spot-market prices for hot-rolled steel have fallen from $756 per ton last September to $425 per ton today, says Charles Bradford, a metals analyst at Soleil Securities Inc. in New York.
Hot-rolled steel is the raw material for the more expensive processed steel used for under-the-hood components and the galvanized steel used for body panels.
Automotive steel costs $100 to $200 more per ton than hot-rolled steel. Because automotive steel prices follow spot-market price trends, automakers and suppliers can expect some relief.
In fact, prices already are trending down, confirms Neil De Koker, president of the Original Equipment Suppliers Association in Troy, Mich. But De Koker says prices still are higher than they were in 2003, when prices started to rise sharply.
Declining prices stem from growing steel inventories at service centers -- the middlemen between the mills and customers. The service centers are stuck with big inventories from furious buying last year that created shortages and high prices.
Last year, surging steel prices hammered the auto industry. Prices skyrocketed as raw material prices increased, steel service centers built up inventories and China imported more steel. The increase shocked an industry that had enjoyed spot-market hot-rolled steel prices as low as $260 per ton in 2003.
Citation Corp., Intermet Corp. and Tower Automotive Inc. all declared Chapter 11 bankruptcy, although Citation has since emerged.