(Oil Price) As the prices of steel, cement and other raw materials climb higher and higher amid tightening supply, drillers in the U.S. shale patch are facing higher production costs, Bloomberg reports, citing Citigroup analysts.
Benchmark steel prices have gained as much as 60 percent in the year to date and a whopping 200 percent over the past 12 months, Barron’s reported last week. The rally was driven by the economic rebound in the United States, but the report noted that prices could not stay too high for too long, not if they are above the cost of production.
That may be the case with usual cycles in the commodity industry but, Barron’s noted, citing UBS analyst Andreas Bokkenhauser, this cycle is different. This time supply is limited, so prices have nowhere to go but up as long as demand is strong.
There are supply chains always and pricing takes time to settle. Econ got this one wrong for a hundred years.
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