Steel hits indusry hard

The off-road equipment manufacturing industry is a major steel consumer, and every manufacturer responding to the AEM survey reported paying higher steel prices in 2004 compared to the previous year. Manufacturers also continued to experience reduced steel availability and longer delivery times. As a result, many survey respondents have delayed hiring new workers, scaled back business expansion plans and shifted some production to non-U.S. sources. Half of the AEM survey respondents said they depend on domestic steel sources; the remainder obtain steel from a combination of domestic and overseas sources.

"Our survey underscores the adverse impact of steel pricing on our members," said AEM President Dennis Slater. "We are very concerned about the potential dampening effect this situation will have on the continued economic recovery of the off-road equipment manufacturing industry."

The median steel price increase reported in the AEM survey was 60%, with many reporting increases of 100% or more. Some 45% anticipated that steel prices would continue to rise through the first quarter of 2005, while 5% expected price drops.

About 85% of survey respondents have absorbed some or all of steel price increases instead of passing them along to machinery buyers. As manufacturers have diverted resources to pay for increased raw material costs, 32% reported moving production capacity offshore or outsourcing; 23% have postponed hiring plans; 28% have put off planned investments; and 15% have reduced work hours or shut down some or all of their operations.