In a bet that the recession truly is over, U.S. steel producers will raise their prices Monday for some of their most popular products.
Although previous attempts to increase prices have been sunk by weak demand and competitive price undercutting, customers and industry observers alike expect the steelmakers to push their prices up about 4 percent.
And that little difference could help raise money-losing steelmakers such as the Bethlehem Steel Corp. into the black, stock analysts said.
Earlier this year, demand for steel was so low that the industry was using less than 70 percent of its capacity, said Christopher Plummer, a steel industry analyst for the WEFA Group in Bala-Cynwyd, Pa.
But improved orders from automakers gearing up for the new model year and the strengthening of some other manufacturers have enable the steelmakers to run at nearly 80 percent of capacity in recent days, he said.
"Things are firming up a little bit. . . . [The increase] will probably hold," said Jim Miller, a salesman at Vincent Metals, a steel distributor in Baltimore. Mr. Miller said that he expected to be able to pass the increase on to his customers.
Previously announced price increases have been preceded by a rush of orders by customers trying to beat the rise, but Mr. Miller said that hadn't happened this year.
Are you kidding? With money as tight as it is? People aren't buying anything but what they absolutely need," he said.
And that's what the big steelmakers are betting on.
Although at least one large steelmaker has announced it will try to raise prices by 5 percent, most experts expect the increase to settle in at the 4 percent level Bethlehem has announced.
Bethlehem, which lost an average of $6.72 a ton on its steel in the second quarter, has said the price of a ton of galvanized steel sheets rolled at Sparrows Point will jump from $701 to $725 a ton Monday.
The price increases will affect the sheets of steel used in everything from appliances to buildings.
If the price increases for the sheet steel hold, prices for other products, such as steel rods and rails, may go up, Bethlehem officials indicated yesterday.
Chriss Street, whose Los Angeles-based Reorganized Securities Group has been a large holder of steel stocks, said the increase will simply mean that producers will stop giving 4 percent to 5 percent discounts on the old published prices.
But because the steelmakers will be getting more money for their steel, profits are expected to improve, he said.
Investors, anticipating the gains, have pushed Bethlehem's stock price up from its mid-year low of about $11 to about $17, he said.