June, 2008

Although we had indications in January, 2008 that the market was rising, no one that I spoke to could ever have imagined the state of the market only six months later.  With 20, 30 and 40% price increases in the steel market we are all wondering when it is going to level off.  A week ago, a major U. S. steel company raised the price of steel for tubular goods by $800 a ton.  Back when President Nixon froze prices to try to curb inflation, the Japanese called it “Nixon shock.”  I think all of us here can agree that this current situation can be described as “steel shock.”

 The price for raw material for both fittings and flanges continues to go up.  We have been informed that billet for flanges will go up in July and August and, as we have seen with this recent announcement on tubular goods, prices will continue to go up on fittings.  With respect to the $800 a ton steel increase, I am told approximately $250 of the $800 increase is for fuel surcharges.  Other tubular companies are looking at this situation and I understand that as they go up, the increase will not be as much as $800, but more likely in the $500 a ton range.  Even so, at $500 a ton no one, including Weldbend, can stand to absorb that type of increase.  With the unprecedented amount of business we have had and continue to have, and the draining of our inventory, a lot of our material is day-to-day, meaning that we are being forced to raise our prices as soon as we get steel material in at these higher prices.  We have little or no cushion.  Steel shortages are still very much a reality.  We are not receiving steel supplies in a timely manner, and we cannot foresee when this highly volatile steel market will begin to simmer down.  We are working six days a week (and some Sundays) and it seems the more we work, the farther we fall behind.  Because of the shortage of material, we understand certain importers in the Houston area are trying to supplement their import stock by buying material from domestic manufacturers through local distributors. 

 In planning our next price sheet, we will be looking both at fittings and flanges.  As of this writing we have not received formal notification from our present suppliers on how much they are planning to raise.  We have few to no orders with USS.  I think it is only fair to you our customers that we wait to see what our numbers will be in both tubular and billet before we put out a new price sheet.  We are also looking for the trend in scrap prices which will not be known until about the 5^th or 6^th of July.

 If we can justify keeping the price the same on some items we will do so, but I know that most items will need to be changed.  With pricing we have already booked for the Fall of 2008, prices will need to go up again.  My father always said, “Don’t kill the goose that lays the golden egg.”  We know we cannot keep raising prices to our customers without repercussions in the welding fitting and flange business; but as long as we are receiving huge price increases of $500 - $800 a ton for pipe, and other significant price increases for billet for flanges, we have little choice.  We will keep you informed on any price change and market movement that we see.  If you have any questions, please call.

James J. Coulas, Jr.
President

You can depend on Weldbend!

www.weldbend.com