What's Happening in Markets
By Staff -- Purchasing, 2/7/2002
- The weakest corrugated box market in decades is showing no signs of regaining its strength. Tags are down 12% from this time last year. U.S. containerboard producers continue to operate at just 86% of capacity. The box market showed a second straight year of reduced U.S. shipments in 2001 and various producers have expressed concern about near-term box demand.
- Shippers will see tighter capacity for less-than-truckload (LTL) trucking by midyear due to a lack of capacity additions in recent months, suggests analyst Gregory Burns at J.P. Morgan Securities. LTL shipping fell better than 6% last year, but Burns foresees a 10% rebound this year regardless of economic strength.
- U.S. steel producers are raising sheet prices, but there is no guarantee the increases will stick given anemic demand and resistance from buyers. Sheet steel prices started 2002 more than $100/ton below their level at the start of 2000, but a recent drop in industry capacity has spurred most steel companies to try a price hike. Some analysts see a repeat of last spring, when too-high inventories killed an industrywide price hike.
- Business travel-cost inflation will be slower than in recent years because of the uncertainty that has shaken the travel industry in the terror aftermath and ongoing recession. The National Business Travel Association projects 3% cost increases for airfares, hotel rooms and business meals in 2002 and a 5% rise in rental car charges.
- U.S., Mexico and Canada have agreed to accelerate tariff reductions on an additional $25 billion in exports under the North American Free Trade Agreement. The U.S. will eliminate tariffs on a range of rubber products and footwear, while Mexico and Canada will cut tariffs to less than 0.5% on U.S. automobiles, electrical and electronic goods, and chemicals.
- Citing a sickly global economy, the energy research team at Merrill Lynch & Co. (ML) has lowered its 2002 crude-oil spot price forecast to $19/barrel from $23/bbl (West Texas Intermediate). ML sees crude at $24/bbl in 2003, projecting a significant retightening in oil market fundamentals as the world economy recovers.
- Department of Transportation (DOT) has neither an effective plan nor the facilities to ensure that Mexican truckers will comply with U.S. safety and environmental benchmarks, says the General Accounting Office. For example, federal regulators have yet to obtain permanent space for conducting regular, rigorous inspections of Mexican big rigs. The DOT, meanwhile, believes it is "well advanced" in efforts to beef up border-safety inspections
| Commodity Category | Period | Up | Down | Same | Diffusion Index |
| Paper products | Jan | 9% | 28% | 63% | 40.5 |
| Corrugated products | Jan | 13% | 31% | 56% | 41.0 |
| Plastic resins | Jan | 8% | 36% | 57% | 36.5 |
| Molded plastics | Jan | 8% | 34% | 57% | 36.5 |
| Aluminum products | Jan | 8% | 34% | 57% | 36.5 |
| Copper & brass products | Jan | 11% | 34% | 55% | 38.5 |
| Semiconductors | Jan | 9% | 42% | 49% | 33.5 |
| Computers | Jan | 12% | 47% | 41% | 32.5 |
| Industrial machinery | Jan | 7% | 56% | 37% | 25.5 |
| Tooling | Jan | 14% | 34% | 52% | 40.0 |
| Transportation services | Jan | 16% | 31% | 53% | 42.5 |
| Energy | Jan | 23% | 26% | 51% | 48.5 |
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