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Bullish on bar: the Bar Products Div. of the Metals Service Center Institute hosted speakers from three segments of the supply chain--end-users, service centers and mills--at its February meeting in Miami. Their comments, though from different perspectives, reveal common concerns over steel pricing, product availability and global trade.

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END-USER PANEL:

Steel Users Anxious About Price

Competition from forgings made in China and India, and a shortage of raw materials, are major concerns for the forging industry, according to Sharon Haverstock, executive vice president at Scot Forge Co., Spring Grove, Ill, a member of the customer panel hosted by MSCI's Bar Products Div.

The forging industry has two basic segments that apply to service centers: open die and closed die. An open-die forge shop, such as Scot Forge, supplies large diameter bar product to service centers. Closed-die forgers purchase smaller bar from service centers to make into other products. The closed-die segment is the larger of the two, a $4 billion business, half of which is automotive related.

Forgers like Scot Forge are seeing a pickup in business activity, but can't just tack on a surcharge like mills and service centers, Haverstock said. "In the forging business, you are talking about custom work. It is very difficult to pass this along. As a middleman, it is very difficult to keep up with the steep rate [of increasing prices], so profitability is going to be a very tough area for our business."

Falk Corp., a gearing maker, is in the process of building a new plant in China, initially for assembly, but eventually for manufacturing, which will shift consumption of forgings and bar to Asia for the Asian market, said Craig Danecki, engineering director for Falk in Milwaukee, Wis.

"When we try to sell product into China, we see a 30 percent drop right off the top [due to the currency imbalance, freight and duties]. It is almost impossible to compete with the competitors presently manufacturing in China."

Falk also plans to outsource some engineering and programming to India, Danecki said, "to find ways to become more competitive and to get into these other markets."

Makers of machined parts are having difficulty absorbing the rapid price hikes as well. "The crucial problem facing us today is this surcharge du jour and the instantaneous escalation of prices," says Miles Free, director of technology services for the Precision Machined Products Association, Brecksville, Ohio. "Our industry is based on long fixed-term contracts. Our members are being personally challenged to go eyeball to eyeball with their customers and make the case, because there is no room to absorb it."

The bar user panelists also expressed concern about the erosion of U.S. manufacturing. "For the Forging Industry...

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