Steel Supply Struggle Hits Door Industry

© 2004 Door & Access Systems
Publish Date: Spring 2004
Author: Tom Wadsworth
Page 42

Steel Supply Struggle Hits Door Industry

Significant instability in the steel market will continue to affect the costs of all steel garage door components in 2004. That includes sectional steel sections, rolling steel slats, springs, and all steel hardware.

That’s tough news for door dealers and manufacturers, but it’s the consensus of several steel suppliers for our industry.

“Since December 1, 2003, and as every week goes by, the mills have been increasing pricing, adding surcharges, and cutting allocations,” says Tom Claes, general manager of New Process Steel. “In the next few months, we see it getting worse before it gets better.”

U.S. steel prices jumped about 30 percent in the first two months of 2004, according to the Wall Street Journal. When steel costs rise, prices tend to rise throughout the supply chain. “This is a highly competitive, thin-margin business,” explains Bob Gifford, president of Interstate Steel.

Rising steel costs are one issue, but a steel shortage can present a worse situation. “Hopefully, a full-blown shortage is not in the cards, but it is a possibility,” says Joel Mazur, managing partner of The Techs. “The steel industry is very vulnerable right now.”

That vulnerability springs from several causes.

1. Increased Domestic Demand. “Domestic demand has been increasing over the past year, and the steel industry hasn’t been building adequate inventories to prepare for this demand,” adds Mazur.

2. Increased Worldwide Demand. China, in particular, currently has a “voraciousness for the importation of raw materials,” says Cynde Vidas, general manager, sheet product sales at Weirton Steel.

And right now, China is a preferred customer over the U.S. “With the declining value of the dollar, the United States is not an attractive customer in the world market,” adds Claes.

3. Fewer Suppliers. The number of steel company bankruptcies and consolidations in the last 3-5 years is unprecedented. With fewer suppliers, “We’re getting to a point where quality, delivery, and service are paramount. Price is almost a non-issue right now,” adds Mazur.

4. Raw Material Shortage. Raw materials, such as coke, iron ore, scrap, and pig iron, are in short supply, and their cost has risen dramatically. Mazur says that, in Feb. 2002, scrap was selling for $65 per ton. But in Feb. 2004, it was up to $300 per ton. “No one can withstand these kinds of cost increases in raw materials,” he adds.

With all these problems converging at the same time, “It’s kind of a perfect storm scenario,” says Gifford.

The Future?

Vidas believes that, as long as two of the above conditions exist, our industry will continue to struggle to get steel.

Mazur adds, “Eventually, the situation will stabilize, but at higher prices.”

“The constrained market will probably be with us for the balance of this year,” says Gifford.

“Really, everything is affected, and nothing is easy to find,” says Claes. “And the bigger problem is – it all changes every day.”