American consumers of steel have had a pretty rough last couple of years. First, the Bush administration imposed tariffs on cheap, imported foreign steel. Then, just as things started to look up for American steel users, a European Union threat of retaliation over the tariffs forced the U.S. to drop them... the dollar collapsed. Today, each U.S. dollar is buying roughly 20% less steel than a single euro can. This is making the steel used by companies such as Williams Industries
On the other hand, steel makers such as Nucor
Nucor pre-announced its earnings this past Friday, as didSteel Technologies
Nucor noted in its press release that demand for its products increased in Q1 2004, with the obvious benefits for its bottom line. And like Steel Technologies, Nucor also attributed part of its increased profitability to the increase in raw materials prices. Nucor uses a "raw material surcharge mechanism" in pricing its products, so when raw material costs rise -- regardless of what Nucor paid for the raw materials presently in its inventory -- the company jacks up its finished product costs in proportion to the rise in current raw materials prices.
Good news for Nucor shareholders. Not such good news for Nucor customers.
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Fool contributor Rich Smith owns shares in Williams Industries, but none in any of the other companies mentioned in this article.