And You Thought Gas Prices Were Bad

[Conan71]

This was an email sent to me by one of our vendors.  

Good news for the steel industry and it's making scrap steel really worth something now.  However, this puts inflationary pressures on just about every industry, especially the oil patch, construction, and other areas which rely on steel in their finished product.  It works into a pass-through price increase to the end user and that eventually trickles in to the prices consumers pay for things.  

Seems global consumption is up on everything.


"MORE STEEL WOES

no, not another increase.........yet

The link below is the latest in the steel industry.  This source has been reliable and very accurate in the past.

http://www.purchasing.com/article/CA6547140.html?industryid=48389

Key highlights are;

- steel buyers will face full-year price inflation of 21% for the market basket of 11 carbon steel grades
- the benchmark grade of hot-rolled sheet in coil (HRC) increased by 24% in the first quarter to $661/ton and now is projected to rise
another 29% in the second quarter to $850

and the even worse news is;

- Purchasingdata.com projects an annual average increase of 48% to $778
for HRC in 2008  (OUCH!!)


And the sad state of affairs reasoning is;

- global markets are setting new highs in pricing because of strong demand from emerging markets in the Middle East, Russia, Brazil and Asia

- stronger-than-expected internal steel consumption in Brazil, Russia,
India and China.

I think the bottom line is; we have it but we're exporting it to the highest bidder, driving up domestic prices (if you want it, pay for it!) and creating shortages that will drive the prices even higher.  We have five mills left in the U.S.A.  Three are foreign owned.


Don't shoot the messenger!"

[inteller]

Chinese scrap buyers invaded us a long time ago.  I've been hearing about this for a while.  I guess it finally got on some economists radar.

[custosnox]

quote:Originally posted by inteller

Chinese scrap buyers invaded us a long time ago.  I've been hearing about this for a while.  I guess it finally got on some economists radar.

The Chinese have effect more then just steel.  I've had to cut back on my gun range time because the cost of ammo (due to the increased cost of metals) has doubled in the past year.

[Conan71]

.223 and 7.62 x 39 have always been cheap centerfire ammo.  It keeps going up and up.  I've about convinced myself to get a Ruger 10/22 for target shooting.

[sauerkraut]

Yeah funny that- how global consumption is suddenly up on everything over night. One would think that stuff would happen slowly over time. Why gas prices jump 30 cents overnight instead of just creeping up 4-5 cents a day?[xx(]

[Steve]

There was a story on "60 Minutes" last night about a Chinese company pumping billions of dollars into U.S. financial markets and basically holding off global economic disaster.  I didn't watch the whole story, so I will leave my comments there, but I wish I had watched it.  It all seems like a giant pyramid scheme, tetering on the brink, and just a matter of time before global depression, circa the 1930's.

[Conan71]

quote:Originally posted by Steve

There was a story on "60 Minutes" last night about a Chinese company pumping billions of dollars into U.S. financial markets and basically holding off global economic disaster.  I didn't watch the whole story, so I will leave my comments there, but I wish I had watched it.  It all seems like a giant pyramid scheme, tetering on the brink, and just a matter of time before global depression, circa the 1930's.

I'm a tinker-toy enconomist at best.  I pretty much trust what Cannon_Fodder tells me when it comes to esoteric economic thought. [8D]  I figure if he doesn't know the answer, I didn't need to know.  I know my personal economics and I know what is driving certain things about the industry I work in, but I get a little spaced out when the topic turns to macro-econ.  I even got an A in the class, but some of the theory just doesn't register with me.


Consumption is up definitely over say ten years ago.  But the sharp rise in everything since the '04 election?  It's nuggin' futz! I honestly think there are some major commodity traders who are selling back and forth to each other in a game of chicken.  Testing the limits and seeing what the true threshold of pain is for the consumer.  One thing which will result is depleted savings.  What it's doing is getting more money out of savings and back into consumption.  

Assuming I'm even remotely close, the end game could be, the major players make their money, confiscate and deplete other's savings and have now made a large portion of the developed world heavily indebted to them.  Pretty drab and dull outlook if that's what one chooses to focus on.  The only real solution is to drive less, buy fewer durable goods, etc. that is how you get commodity prices to come down, but you injure other value-added businesses and sales businesses in the process.

All I can do as a response to business demand is to make as much of the situation as possible for as long as possible and save a reasonible amount without putting so much back that I contribute to a sheeple recession.