Bottom line: Purchasing is thriving in most markets

Staff -- Purchasing, 6/2/2005

Plate was one of the last products to peak in price in 2004 and the decline in 2005 has been modest. "Actually, steel plate has shown some of the strongest pricing of any carbon steel product, so prices will retreat at a slower rate than will most other products through mid-2005," reports analyst John Anton at Global Insights. "The cause of strong prices is robust demand across all major end-markets." Still, the price escalation may have peaked since Purchasingdata.com calculations suggest early 2005 prices increased by less than 1% on average when compared with prices in late 2004.

Yet, John Tulloch, executive vice president for steel and chief commercial officer at Ipsco agrees, citing "thriving purchases of plate" by makers of heavy machinery, rail cars, shipbuilding and large-diameter pipe. "The plate market has distinguished itself as being robust," agrees David Sutherland, president and CEO of the Lisle, Ill. platemaker. That jibes with market data showing first quarter shipments some 13% stronger than in the fourth quarter of 2004. In fact, such key plate end-markets as the construction, industrial machinery and oil and gas field equipment industry are very healthy. "Oil and natural gas prices remained high throughout 2004 and into 2005," says Anton, "so energy companies are more confident that drilling and pipeline projects will be profitable."

Heavy equipment is one of the strongest sectors of the economy, boosted by a weak U.S. dollar. Construction and materials-handling machinery output is also expanding and expected to have another strong year in 2005. Railcar orders are rising quickly and global shipbuilding is improving as oceangoing freight rates skyrocket. The problem for some suppliers, however, is that nonresidential construction isn't picking up as quickly as they had expected; that's why first quarter shipments still were 5% below the volume of January-March 2004. Commercial construction, for example, was supposed to post strong growth in 2005, but it hasn't happened yet.

Supply of plate was struggling to keep up with demand for most of last year, but strong U.S. and Canadian production and high imports have eliminated any market tightness. Service centers closed the first quarter with 1.28 million tons of inventoried plate, the highest tonnage since December of 2002. Anton points out that plate production surged in 2004, setting new records; however, most of the temporary supply increase—-and downward pricing pressure—has come in the coiled plate segment.

Demand for cut-to-length plate by foreign buyers at shipbuilding yards in Korea and China is now booked into 2007. Builders of large-scale hydroelectric power plants in China, manufacturers of heavy machinery in the U.S. and pipe makers in Canada have kept that cut-plate product line tight, and prices elevated. Anton says that "exports of cut plate continue to trend upwards, while imports remain weak."