Price Pain Remains

Only a few years ago, the steel industry was plagued by overcapacity, and it was a buyer's market. Now the tables have turned, and soaring steel prices have become the bane of many U.S. industries, none more than automotive.

Rising steel prices usually are cited as one of the main reasons behind the recent spate of supplier bankruptcies.

Unfortunately, little relief is in sight. Wim van Acker, managing partner at Roland Berger Strategy Consultants-North America, predicts historically high steel prices will continue to batter the auto industry for at least the next three years.

According to Roland Berger, steel prices at times have soared 150% higher than 2003's depressed levels because of increased consumption by China and India, the consolidation of the steel industry in the U.S. and continued growth in demand.

Hot-rolled coil prices, a commonly used benchmark for pricing, hit a record $756 per ton in September 2004 and averaged $744 per ton in 2005.

Meanwhile, China's consumption of steel has doubled over the past decade and now is the largest consumer of steel in the world, van Acker says.

Consolidation also has been a factor. Three companies control 55% of the U.S.: Mittal Steel Co., United States Steel Corp. and Nucor Corp.