Housing Starts Jump 17.2%: Good for Steel?

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Ferrous Metals, Supply & Demand

When one seeks to gauge the health of the US steel industry, a few key measures go a long way. Automotive production (said to make up some 25% of domestic steel demand) and housing starts make up two of the biggies. And these numbers suggest a mixed bag. According to the Wall Street Journal, housing starts surged by 17.2% during the past month. At the same time, motor vehicle and parts production fell 7.9%, according to the same article. Does this represent a mixed bag?

Probably not and in fact, the gauges still look pretty poor for steel. Here is the bad news:

  •  Housing inventories are likely still too high and many of the new housing starts involved apartments, not single family homes
  • Mortgage interest rates are increasing
  • Prices for finished consumer goods fell by 1.6% according to PPI data
  • Manufacturing capacity utilization continues to fall

On the other hand, carbon steel scrap took an about face, climbing 20.6% compared to a decrease in April. Other metals are also increasing in price. Both gold and copper ores increased and aluminum and copper scrap also posted price increases.
At the same time several steel producers increased prices ” AK Steel increased it’s carbon products by $20/ton and ArcelorMittal is also raising it’s prices for flat rolled products by $50-90/ton. Other producers have indicated price increases may be on the way.

As we have seen previously, any slight uptick in demand anywhere could cause prices to increase.

–Lisa Reisman

(Editor’s Note: John Packard Steel Market Update has informed MetalMiner that Housing represents 5% of total steel demand whereas commercial construction represents 40%. Automotive represents 14-20% of total demand)

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