Most Manufacturers Finding Ways to Absorb High Steel Costs

December 17, 2004—The Association of Equipment Manufacturers (AEM) has conducted a survey which quantifies the significant negative impact of increased steel prices upon the business operations of construction and agricultural equipment manufacturers.

 

Every manufacturer responding to the AEM survey reported paying higher steel prices in 2004 compared to the previous year. Manufacturers also continued to experience reduced steel availability and longer delivery times.

 

About 85 percent of survey respondents have absorbed some or all of steel price increases instead of passing them along to machinery buyers. As manufacturers have diverted resources to pay for increased raw material costs, 32% reported moving production capacity offshore or outsourcing; 23% have postponed hiring plans; 28% have put off planned investments; and 15%t have reduced work hours or shut down some or all of their operations.

 

The median steel price increase reported in the AEM survey was 60%, with many reporting increases of 100% or more. Some 45% anticipated that steel prices would continue to rise through the first quarter of 2005, while 5% expected price drops.

 

Half of the AEM survey respondents said they depend on domestic steel sources; the remainder obtain steel from a combination of domestic and overseas sources.