How long can the rally in Steel last?

The tremendous rally in steel prices started back in June. Since June, cold rolled steel prices have jumped over 10%. A more remarkable jump happened in rebar prices – rebar has rallied 30%+ since June, and is at the highest price since the crash of 2008.

Steel is a decent proxy for economic activity in real time. Steel prices typically will follow the economic cycle quite closely. When steel is up, people are buying cars, and the car industry is a huge driver of our economy.

So – how long can Steel maintain these prices? Well, looking at U.S. auto sales, we can expect significant support for steel prices going forward. Auto sales are just now getting back to what they were before the crisis. Last month is the best month since 2008, and people expect November to be even better. The WSJ reported:

“The auto industry seems to be defying the overall economic position” of the country, saidJim Lentz, head of Toyota Motor Corp.’s 7203.TO +0.16% U.S. sales arm.

Industry executives interviewed ahead of this week’s Los Angeles Auto Show said November results, due out next week, should continue the year’s big gains. Some analysts estimate November sales could hit an annualized selling pace of 15.2 million cars and light trucks—the strongest single monthly showing since 2008.

That’s really good news for the country. A significant amount of the U.S. economy is based around new cars and trucks, and just getting sales back to where there were for the 20 years before the crisis is great news for the economy.

It’s pretty clear steel prices have significant support just from car sales rebounding.

 

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2 Comments on "How long can the rally in Steel last?"

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brad
3 years 8 months ago

How do loans for cars factor into this?

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Greg
3 years 8 months ago

How do leases figure into sales numbers?
Ive heard that leases are becoming very popular again

Not sure exactly how that would change things, except that in some sense a lease seems to be selling a fraction of a car.

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