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Tulsa World (Oklahoma)
March 20, 2005
Pricey Steel: A Hard Fact
By Robert Evatt World Staff Writer
Steel-intensive industries adjust to cost increases As a material, steel is strong and dependable,
forming the backbone of everything from machinery to buildings.
But as a traded commodity, steel has become ungainly and unpredictable, with skyrocketing
prices that have forced local companies to adjust their business practices.
"It was the tightest market ever in terms of supplies, and no one had ever seen steel prices go up
so fast," said Jim Ponton, manager of Cargill Steel and Wire at the Tulsa Port of Catoosa.
Cargill buys coils of steel from mills and cuts it to manufacturers' specifications.
Though selling prices vary depending on the form of steel, coiled steel wire jumped from $270
per ton in August 2003 to $780 per ton by last September, Ponton said. The prices subsequently
leveled off, with steel wire selling for about $640 per ton as of February.
After a year of rapid change and increased overhead, companies in steel-intensive industries are
now adjusting to the higher price structure.
Executives in general aren't sure when or if prices will return to last year's peaks. But Dave
Kollmann, senior vice president of Flintco Cos. Inc., believes the Tulsa-based general contractor
and others in the industry won't be hit with further spikes.
"In future years, I don't think we'll feel the same impact," he said. "The worst is over."
The higher prices continue to affect every business that even touches steel, from mills and
fabricators to manufacturers that use steel in their materials.
"The prices caught everyone by surprise," Kollmann said. "It affected a lot of projects, so we had
to come up with alternative ways to solve the problem."
Most local steel producers and users attributed the price increase to China, whose strong pace of
economic growth caused the country to buy up much more steel than before. Ponton said that
between October 2003 and last September, steel imports to the United States fell sharply, largely
because there was simply little steel available.
"It's hard to believe that the steel market today is being controlled by overseas markets," Ponton
said. "That didn't happen five years ago."
The falling value of the U.S. dollar worsened the problem, he said.
The culmination of factors has presented a challenge to many local companies as they work to
maintain their metal supplies.
"When the prices shot up, all the steel producers broke their agreements with manufacturers like
us," said Mike Howard, chief financial officer of Webco Industries Inc., a Tulsa-based
manufacturer of specialty tubing and pressure tubing products.
Cargill's Ponton said regular and new customers wanted to buy more steel wire from the company
in the wake of uncertainty over supplies, but Cargill had to focus on filling orders placed before
the price spike.
"On a typical month we could sell to 140 customers, but during that time we were only selling to
40," he said.
Dennis Ennis, a sales worker at Security Pest and Rebar, said the Tulsa company halved the
amount of rebar it keeps in stock, though sales have remained the same.
As prices went up, buyers of finished steel products had to find ways to deal with the new costs.
Kollmann said Flintco and its customers suddenly were looking for ways to compensate.
The dollar amount of some projects was increased while the scope of others was scaled back,
either by reducing square footage or using less-expensive materials.
"If a concrete wall has a lot of rebar, we might go to concrete blocks, which has less steel,"
Kollmann said.
Ultimately, construction companies dealt with higher steel prices by passing the cost on to
customers, said John Humphrey, vice president of Rick Scott Construction. And while he said the
company explained the situation to each affected party, the process wasn't fun.
"No owner wants to hear that their construction costs are in creasing," he said.
Humphrey said the escalating price of steel caused a 5 percent average increase in the cost of his
company's projects.
Passing along the higher costs has allowed steel-related businesses to maintain their profits.
"It's only had a small effect on our bottom line," Kollmann said.
In fact, some companies that fabricate steel products wound up benefiting from the sharp rise.
Steel ordered by fabricators often does not arrive at their warehouses for some time, so when steel
prices went up, fabricators immediately increased their prices accordingly, even on products
made from steel purchased at lower prices.
Howard said the dollar amount of Webco's sales has gone up 50 percent from last year, even
though sales volume increased only slightly.
"It's led to a period of prolific profitability for Webco," he said.
Robert Evatt 581-8447
robert.evatt@tulsaworld.com
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