Steel/Market Trends

Analysts at MS (Morgan Stanley) predict a steep (41%) decline steel prices from last year’s average $854 m/ton to an average $502 m/ton in 2009. Additionally, MS projects an 11% cut in global demand, leaving steel markets oversupplied. Most notably, inventories in China have reached historic highs. All this in the face of a 24% cut in global production (

Does this trend spell relief for two ailing American institutions, auto and home builders? It’s too soon to tell. Manufacturers could, under heavy price pressure, simply pass along the savings to the customer. Home sales have slipped drastically, but would incrementally lower prices make any difference in a credit tight market? Likely not. And how can profit starved GM and Chrysler afford to pass along any cost savings without further eroding an already weak price structure? That’s a tough call. Further discounts on what many are already considering distressed merchandise, could lead to further eroded consumer confidence. No matter how we look at it, lower steel prices will not equivocate to a fire sale on American homes and autos. We’ve seen these trends before, with little if any effect on these two manufacturer’s price points.
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