Metals prices are tanking and the reason is not a good
one – the economy continues to weaken.
Steel prices have dropped 20 percent in the past three
weeks, a sharp reversal from the pattern from 2003 to 2007 when Chinese demand
sent prices soaring. Now steel from China
and other countries is pouring into the United States at cut-rate prices
because of weak local demand.
Aluminum prices on the London Metal Exchange went from
$3,292 per metric ton in July to $2,340 in early October, a 29-percent drop. Alcoa
laid off 770 workers at its Rockdale aluminum smelter, further curtailing
production. Ohio Valley Aluminum closed
its plant in Boonville, IN.
Almost 69 percent of economists think the economy has
started or will enter a recession this year, according to a survey released today
by the National Association for Business Economists. That compares to 56 percent in May. "Business economists have become more
negative on the economic outlook for the next several quarters as a result of
the tightness in credit markets and weakness in consumer spending, expecting
growth to stall in the fourth quarter," says Chris Varvares,
president-elect of the NABE and president of Macroeconomic Advisers. "If
financial conditions fail to improve quickly, near-term economic prospects
could deteriorate markedly," he warned.
Other materials prices are also affected by the economic
downturn:
- Copper
prices dropped from $8,985 per metric ton on July 4 to $6,221 on October 3,
according to transaction data at the London Metals Exchange. That's a drop
of 31 percent in just three months.
- Nickel
prices have been dropping since March 2007, as already reported
by Design News. Nickel cash prices
were set at $15,755 in early October, down a whopping 53 percent in a
little more than 18 months. Declining appliance sales as well as weak
demand from China
are the main reasons.
- Even
titanium, the aerospace superstar, is struggling, in part because of the
protracted strike at Boeing. ATI Allvac, a supplier, cut its aerospace
titanium surcharge 12 percent.
Analysts expect prices to remain weak well into next year. Tarang
Bhanushali, Metal Analyst for India Infoline, forecasts another 10-percent
drop for aluminum and copper next year. Expectations of further weakness will
push OEMs to keep inventories at a bare minimum. Steel is in the same boat. "We
expect (steel prices) to be flat for the rest of the year and a 10-percent fall next
year," says Bhanushali.
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