Rising Steel Costs Squeeze Garage Door Industry

© 2008 Door & Access Systems
Publish Date: Spring 2008
Author: Tom Wadsworth
Page 48

Rising Steel Costs Squeeze Garage Door Industry

By Tom Wadsworth, Editor

“Garage door manufacturers are getting squeezed by higher steel costs on one side and a depressed housing market on the other side.”

That’s how Bob Gifford, president of Interstate Steel, summed up the current economic predicament for the garage door industry.

Squeezed Out of Business

The financial crises at Able Door and Ankmar painfully illustrate the problem. Jim Marino, general manager at Able, posted this statement in February on the Able Door Web site:

“We have witnessed a substantial drop in the new housing and construction market during the past 14 months. In addition, we saw several steel price increases throughout that period and the current steel market is forcing prices to rise even higher. Regrettably, these factors have made it very difficult for us to compete in the sectional door market.”

Able closed its operations on Feb. 29, 2008. All of Ankmar’s assets were sold at auction on Feb. 22.

Steel Pressure

Most of us are aware of the depressed housing market nationwide. The evening news won’t let us forget about it. But many may not be aware of the significant pressures now coming from skyrocketing steel costs.

Steel is the primary commodity used in garage doors, rolling doors, and even in door openers. Volatility in the steel market has a direct impact on all of us.

For a closer look at this current volatility in steel costs, we sought the insights of two steel experts: Bob Gifford, president of Interstate Steel, and Don Switzer, product manager of Steel Dynamics’ Flat Rolled Division. (Steel Dynamics bought The Techs in mid 2007.) These industry veterans supply large volumes of steel to garage door manufacturers.

How much have steel costs risen since Dec. 1, 2007?

Gifford: The base costs for galvanized steel (the kind used in most garage door material) increased $30 per ton in December 2007. That was followed by another $75 per ton increase in January 2008. In February, these costs increased another $65 per ton, making the total increase $170 per ton—or 28 percent—between December and February.

Typically, these costs swing up or down by $15 to $30 per ton. So a straight-up $170 is huge.

When did this latest volatility begin?

Switzer: Steel prices have increased dramatically since December. That’s when steel companies globally experienced a significant increase in the cost of raw materials used to make steel.

Raw material prices escalated aggressively in the fourth quarter of 2007. In addition, the price of steel scrap has increased more than $200 per ton, due primarily to limited supply and an increase in scrap exports. Iron ore is up 45 to 65 percent, with many alloys doubling or tripling in price.

Briefly, what are the top three reasons for this current spike in steel costs?

Switzer: Increasing costs of raw materials, energy, and transportation.

Other pressures are affecting U.S. steel costs. Higher world pricing is limiting imports and pulling steel to other overseas markets. Without imports, the demand for steel has outpaced supply.

The weak dollar and a substantial increase in oceangoing freight have also played a role. In addition, the paint industry has announced a five percent increase that has yet to hit the door industry.

Will steel availability become a problem for our industry in the next few months?

Gifford: With constrained domestic capacity and fewer import tons available, there is the possibility of shortages occurring during the second and third quarters of 2008. How severe is really a jump ball. Some analysts are predicting imports to fall from 25 percent in 2007 to possibly 6 or 7 percent during 2008.

Switzer: There have been a number of unexpected outages at several U.S. steel companies. With limited imports and reduced service center inventories, any pickup in demand could have an impact on supply.

What’s your best forecast for steel costs for the door industry for the rest of 2008?

Gifford: Steel prices for the industry will possibly continue to rise but at a slower pace. The supply squeeze at domestic mills will keep an upward pressure on prices for the balance of 2008 and maybe into 2009.

Switzer: Steel analysts are predicting that pricing will continue to rise in the first half of 2008.