New Housing Market Data: Positive for Steel, Aluminum and Copper?

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New statistics from Standard & Poor’s Case-Shiller Home Price index suggest that for some housing markets, the trends have begun to move in a positive direction. Specifically, markets such as Boston, Charlotte, Chicago, Cleveland, Dallas, Minneapolis and San Francisco all saw house prices increase during this past month according to a recent story from NPR. And according to Robert Shiller, creator of the famous index, This is the first time in almost three years that we’ve seen price increases. Indeed this could be a very positive indicator, though we’d like to see three months of positive trending data before we conclude we have a growth trend. And where there is growth in housing, there is growth in several key metals markets particularly copper and aluminum as well as steel.

But despite the somewhat positive news, several factors still weigh heavily on the housing market. These factors include: still rising unemployment, wage cuts and a decrease in consumer confidence, according to a recent article in the New York Times. And here the numbers still do not show a positive trend, The Conference Board Consumer Confidence Indexâž ¢, which had retreated in June, declined further in July. The Index now stands at 46.6 (1985=100), down from 49.3 in June. Moreover, we’d add that March ” August represent prime house-buying months. We’d expect to see more house-buying activity during this time frame. We haven’t examined how the Case-Shiller index factors seasonality into the equation.

Housing starts as well as increasing home prices have a substantial impact on aluminum for which approximately 12.6% of total demand goes into building and construction (this also includes commercial construction) according to the Aluminum Association. And 49% of copper consumption goes toward construction, according to (see the report marked Annual Data) this information from the International Copper Association. The housing market has less of an impact on total steel consumption. We’ve seen estimates of 5% of all steel demand goes into housing but 40% of all demand goes into other construction. And though the domestic steel titans believe the worst of the recession has passed, few of these producers believe steel demand will see much of a pick-up before 2010. Here is ArcelorMittal’s take on the outlook for steel as well as US Steel’s and Nucor’s outlooks.

To get a better sense of the housing market, pay heed to earnings announcements from Centex Homes (due out any day) and Toll Brothers, due out August 12.

–Lisa Reisman

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