Steel Product Prices Forecast To Rise Faster Than Raw Steel

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As investors look for signs of inflation, a report on a rise in steel prices — and a larger rise in products manufactured with steel — might be cause for concern.

With steel prices dropping a dramatic 25.1% in 2009, and then recovering over the next two years, one analyst sees steel prices declining 3.8% in 2014 before rising at an annualized rate of 2.2% per year until 2017.

IBIS price os steel

Five key products set to rise in price

Researchers at IBISWorld, which publishes 700 US industry reports, identified five key products that will likely undergo accelerated price growth over the next three years due to rising steel prices.  These products include: security wire fencing, nails, elevators, building demolition machinery and equipment and forklifts, the report noted.

IBISWorld forecasts the average price for security wire fencing will rise by an annualized rate of 4.5% over the next three years, far outpacing the rise in the cost of steel.  “Although buyers will pay higher prices for security wire fencing going forward, they can take steps to minimize the impact of these costs,” such as bulk purchases and long-term contracts.

Construction products forecast to see most significant price rise

IBIS product demands

Products used in construction will see higher prices as a result of the rise in steel prices.  The IBISWorld report forecasts that nail prices will increase at an annualized rate of 3.8% over the next three years, compared with 2.6% annualized growth from 2011 to 2014.  A larger product, commercial elevators, will see a higher price rise.  Higher demand and higher input costs are projected to accelerate elevator price growth to an annualized rate of 4.2% from 2014 to 2017, the report noted.  Increased building activity and higher steel prices will accelerate price growth for building demolition machinery and equipment, which is forecast to increase at an annualized rate of 3.6%, the report said, noting that forklift prices are expected to rise 3% on an annualized basis.  The report advised buyers to make purchases now to avoid price rises.

“Declining steel prices helped shield buyers from the full brunt of the post recession boom in construction and industrial activity the past three years, but that will not be the case heading into 2017,” the report said. “With steel prices forecast to return to growth and construction and industrial activity poised to accelerate, price growth for steel-based products will rise further.”



About the Author

Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)valuewalk.com