Panic Buying Sends Steel Prices to New Record Highs
April 25, 2008 – Today saw steel prices soar to record highs as a report released by world steel producers confirmed worries that current production has failed to keep pace with world demand. One industry official, who did not wish to be named, expects the panic buying to continue and noted that “for the past decade, prices of scrap steel fluctuated between $50-$80 USD/ton.” Late last year, that price doubled to $150 -$200 USD/ton. By March 2008 it doubled again to $345USD.
Today’s surge to $865 USD/ton reflects a depletion of steel reserves to historic lows and the inability to increase production to keep pace with world demand.” One economist today noted that steel at these price levels will have a devastating effect on consumers worldwide. The world’s economies are built on steel. Without it, the machine breaks down. Right now there simply isn’t enough to go around.
Where will it stop?Nobody seems to know.After today’s activity, many feel certain that more increases are ahead.How high will it go?
Well, it depends.
As the old’ saying goes, there’s good news and bad news. First, the good news. The above headline isn’t real. The story is fiction and the record prices described haven’t actually happened yet. The bad news is that word “yet.” You see, while fiction now, a good part of what transpires in this story is slowly becoming reality as we speak.
Scrap steel, which was cheaply priced for years, really has risen to over $345.00/ Ton within the past few months. Reserves are being tapped. Worldwide demand for fuel, metals and food staples are creating shortages, and prices on these items continue to increase. China’s recent economic expansion has had a huge impact on commodity supplies & prices. The same supply/demand fundamentals that have driven crude prices to new highs are now driving steel prices higher.
While demand for crude increases worldwide, US policy has been to conserve, rather than to increase supply. For years the strong dollar enabled the US to rely on the rest of the world to produce discounted resources that we would import to meet our nation’s growing demand. The resulting complacency resulted in a reliance on aging systems without any new additions to take their place. Over 30 years have passed since a major nuclear power plant, oil refinery or steel mill has been built in this country. The last ones we did build, which were state-of-the-art in their time, are becoming aged and antiquated and are no longer capable of producing enough to sustain current demands.
As the once mighty Yankee dollar loses its luster, our ability to import shortfalls cheaply is no longer the viable option it once was. To make matters worse, the worm has turned in the sense that the recent strength of the Euro and the dollar’s weakness are slowly turning the USA into an exporter where it once was the dominant importer. The result is an ever increasing demand on our already limited resources.
The shortages and resulting price increases we are seeing today are not an overnight occurrence. The US has more untapped natural resources than any country on the planet. As one of the largest consumers of the world’s resources, one would think we would be thinking of ways to use what we have. Yet, for the past 30 years, the US has adopted a policy of using the resources of others while preserving our own, treating them like holy relics that should not be touched. Instead of finding ways to tap known resources, the US for the past 30 years has relied on the rest of the world to do it for us.
Americans feel that their appetite for foreign resources should be met on command. The world should not only produce whatever we want, but do it at a low price. So, if we have a gas shortage, it’s the Middle-East’s fault. Drill more wells but do it on your land and off your shores; build more refineries but do it in your cities. We can’t do it in America because it’s dangerous, it’s bad for the environment, and it will pollute the oceans and destroy the planet, so you do it for us. Somehow, if another country does it, it’s different. If prices go up in the process, however, the rest of the world is being greedy. These countries need to find a way to keep up with our demand. They need to expand and build but do it on their own dime, quickly and efficiently and without raising their prices. Anything less and we’ll be outraged. How dare they? Unfortunately for the US, 30 years of neglect is not something that can be repaired anytime soon.
50 years ago, the USA was #1 in that we had the biggest and baddest of everything. We were building nuclear plants and had the world’s largest coal mines, the biggest oil companies and the best refineries. The iron range was cooking with activity and the country was producing steel in the biggest, most efficient steel plants in the world. Pittsburg, Pennsylvania was the steel capital of the world, and the USA was the industrial engine of the planet that everyone else looked to as the model for building their own economies.
The 1970’s was a time before computers, the internet and e-mail. Cell phones were the size of suit cases and a new technological age was in its infancy. Nuclear energy had its growing pains. The drilling and transportation of oil were still being done old school. We were adept at creating new technologies, but not at safeguarding them. Mistakes were made. While the rest of the world has adapted, refined and made full use of the new technologies, the US has not. More than 30 years have passed while the US continues to sit on the largest oil reserves in the world. We have not built a refinery, a steel mill or nuclear plant while the rest of the world has – and good ones at that. Yes we have the resources, but they not do us any good unless we utilize them.
While America sits idly by, the rest of the world has left us in the dust. The US has dropped from #1 to the 3rd largest producer of steel while Japan, a country with limited resources of its own, is now #2. We’ve regressed from being one of the largest producers to becoming the largest importer of crude in the world.The oil we drill we ship to the mid-east or to countries like Japan to refine, only to ship it back to the USA because we don’t have the capacity or the refining capability in the refineries we do have to refine the types of oil we do pump.
We have the brightest minds in the world, and were responsible for bringing nuclear energy to the world. Unfortunately, France now holds the title of world leader in this technology. They are energy independent, building for themselves and the rest of the world modern nuclear plants that generate energy without incident or accident. The USA, once known as the nuclear knowledge center, no longer has people with the knowledge to build a plant even it we wanted to. Most of these people are too old or have moved on to the countries that will utilize their knowledge and know how.
Environmental activists must acknowledge that what happened in the past is past. It’s 2008 and the technologies of today dwarf those that built the systems that caused concerns in the past. Look at other countries that didn’t go into a cocoon, countries that have taken the technologies of today and adapted them to improve the processes and safeguards of the 1970’s.
If France can produce safe and issue-free nuclear plants I think we can do the same here in the USA. If other countries can drill oil and ship and refine it without causing catastrophic effects, then I think we can too.
To continue to focus on the problems of 30 years ago and say that the same issues still exist is religion, not realism. In the end, we are responsible for the situation we find ourselves in today because of our own selfishness and greed. We must stop expecting others to do for us what we refuse to do for ourselves. In addition, we must stop criticizing them if they can’t do it quickly or cheaply enough. And then we wonder why the rest of the world thinks Americans are a bunch of pompous, self-centered morons
We need to get with the program and show the world we are not self centered-morons. We are a nation rich in resources, but we misuse and abuse them. With all our knowledge, all our resources and all our abilities, we proudly pat ourselves on the back for building ethanol plants that burn the food we grow to make energy that we already have in the ground but refuse to drill for. There is currently a shortage of rice and other foods in many parts of the world. We may think we’re cool and trendy and GREEN building ethanol plants to burn food to power our vehicles, but the rest of the world thinks we’re fools.
In the end, it’s a question of supply and demand.As world demand increases for the resources our planet has to offer, the supply needs to keep pace or some will have to use less.The best way to allocate limited supply is to eliminate some of the demand.This is done through prices.As prices rise, demand slows.Some will pay the new price and some won’t.Prices rise until the supply and the demand meet equilibrium, where what is demanded meets what is available.
Today, prices continue to rise because demand is still greater than the supply.Other countries claim that the US needs to start contributing to world supply and not depend on everyone else to make up the shortfalls.The US continues to refuse to do so.Building wind mills, solar panels and BURNING OUR CORN AND BEETS IS NOT THE ANSWER.
There is hope, however.As prices rise more and more, Americans are changing their attitudes.Many now agree that we need to start implementing real programs for utilizing our available resources IN A SENSIBLE MANNER.We need to once again take the lead.We need to drill new wells, build new refineries and harness the new, safer nuclear energy.We need to update our old mines and mills, and catch up to the rest of the world.
Unfortunately, 30 years of ignoring the problem cannot be undone overnight. Eliminating the red tape and writing rules and regulations that will safeguard our systems without making them too expensive to build will take time. Building these systems and getting them manned and producing will not happen overnight. While we can fix the problem that took 30 years to create, we will have to live through a few more years until we turn things around. For now, supplies will continue to fall short in a world where demand continues to rise. Where it will all end is impossible to predict, but one thing is certain. Prices are high and heading higher, with nobody knowing where they will end for now.