Recession-slammed prices for metals, cement and lumber are slowly clawing their way back up, and won’t be subject to any speculator-driven price spikes anytime soon.
Prices in the foreseeable future are more likely to be determined by demand and supply fundamentals than a return of investor-stoked futures bidding of the kind that drove up costs for aluminum, copper, lead, nickel, tin and zinc, creating a bubble that burst in mid-2008.
The prerecession investment frenzy was fueled by individuals and hedge and pension fund managers. They were betting that demand for metals in the U.S., China and elsewhere would continue at a heady pace, with no slowdown in sight.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
They were wrong. The selloff, which came amidst the worst recession since the 1930s, deflated prices by 50% within less than a year -- from May 2008 to February 2009 -- based on an International Monetary Fund index.
Going forward, metals prices will be tempered by what we expect will be a long and tepid economic recovery. The odds are that it will take five years for the prices to approach the highs reached in late 2007 through late spring 2008.
Take aluminum, for example. Its use soared to around 23 million pounds in the U.S. and Canada during 2005 and 2006, and just slightly less in 2007, before tumbling to 15 billion pounds as the recession hit. Look for aluminum demand to inch up to 16.5 billion pounds this year, but it will be 2015 or so before aluminum consumption approaches the levels of a decade earlier.
Ditto for U.S. steel production, which, like aluminum, is tied closely to the consumption demands of the automobile, appliance and construction industries. Recovery by the latter two will stagnate for several more years. Automakers will slowly boost production through mid-decade, but U.S. mandates to increase vehicles’ fuel efficiency will prompt them to use more lighter-weight materials, especially plastics and composite fiber materials.
But even though steel output won’t approach its prerecession levels until 2015 or so, more steelmakers will be able to make a profit with lower production from more-efficient steel plants.
Cement manufacturers and lumber mills can also expect incremental production growth, tied as they are to the fortunes of the housing, office and commercial development sectors. It will be at least five years before they see companies in those sectors buy as much product as in the years immediately preceding the downturn.
-
What Is a Qualified Charitable Distribution (QCD)?Tax Breaks A QCD can lower your tax bill while meeting your charitable giving goals in retirement. Here’s how.
-
Embracing Generative AI for Financial SuccessGenerative AI has the potential to reshape how we approach learning about and managing our personal finances.
-
Europe Faces Economic and Political Headwinds Next YearThe Letter Challenges for Europe: Potential tariffs, high energy prices and more competition from China will weigh on the bloc in 2025.
-
Don't Sleep on Japan's Economic TransformationThe Letter After almost three lost decades, Japan — one of the world's biggest economies — is finally showing signs of life.
-
Kiplinger Outlook: Telecom Companies Brace for Tough TimesThe Letter The telecom industry is entering a new era that threatens profitability. But the coming Trump administration will make it easier for the major players to adjust.
-
Start-ups Trying to (Profitably) Solve the World’s Hardest ProblemsThe Letter More investors are interested in companies working on breakthrough science to tackle huge societal challenges. The field of deep tech has major tailwinds, too.
-
The Big Questions for AR’s FutureThe Letter As Meta shows off a flashy AR prototype, Microsoft quietly stops supporting its own AR headset. The two companies highlight the promise and peril of AR.
-
China's Economy Faces Darkening OutlookThe Letter What the slowdown in China means for U.S. businesses.
-
AI Start-ups Keep Scoring Huge SumsThe Kiplinger Letter Investors continue to make bigger bets on artificial intelligence start-ups, even for small teams with no revenue. Some backers think a startling tech breakthrough is near.
-
Should We Worry About the Slowing U.S. EconomyThe Letter With the labor market cooling off and financial markets turning jittery, just how healthy is the economy right now?
