What's Happening in Markets
Staff -- Purchasing, 4/4/2002
- The recent rapid runup in future-delivery prices for steel mill products "will lead to a crash" says market economist John Anton at DRI-WEFA Inc. He says the mills "are repeating the same mistakes of two years ago, jeopardizing the budding recovery and threatening to again build excess inventory that will crush pricing by midyear." Hot-rolled steel sheet already has risen $40/ton since January to $240-$260 now, and mills are seeking $280-$300 for third quarter deliveries.
- After falling 21% lastyear, nonferrous prices should rise 3% on average in 2002, according to the latest consensus forecast. However, prices through first quarter were down another 5 from the 2001 average due to still-huge metals inventories in warehouses worldwide.
- Wood pulp demand is not expected to improve until the second half of 2002 and then only slowly, according to the analysts' consensus. March prices for benchmark northern bleached softwood kraft (NBSK) slipped $15/metric ton to $460, the lowest point since March 1994. Pulp prices are an indicator of future trends in paper product prices.
- Crude oil prices, which rose 20% to $24/barrel in first quarter 2002, will probably advance further as producers curtail supplies. The International Energy Agency (IEA) now forecasts world demand this year at 76.4 million barrels per day, up from 76 million in 2001. Crude output was 76.3 million bbl/day at the start of the year, and is set to fall to 74.8 million with production cutbacks promised by producers.
- Sentiment in the gold market has turned bullish, and the consensus forecast now projects an annual average $285/oz price for 2002, up from $272/oz last year. The sea change in market sentiment has occurred because investment fund managers are using gold as an alternative to flat bond, equity and currency markets.
- "Difficult market conditions" have caused sales of styrene-based plastics, fibers and fiber intermediates to be "particularly hard hit" in North America and Europe for several months, says Jurgen F. Strube, chairman of the executive board at BASF. He declines to project when a purchasing recovery will begin because, "In the first months of 2002, we have not yet seen signs of a strong recovery in our order books."
| Commodity Category | Period | Up | Down | Same | Diffusion Index |
| Paper products | Mar | 16% | 21% | 63% | 47.5 |
| Corrugated products | Mar | 16% | 16% | 68% | 50.0 |
| Plastic resins | Mar | 16% | 16% | 67% | 49.5 |
| Molded plastics | Mar | 26% | 22% | 51% | 51.5 |
| Steel | Mar | 32% | 22% | 46% | 55.0 |
| Aluminum products | Mar | 26% | 24% | 51% | 51.5 |
| Copper & brass products | Mar | 16% | 26% | 58% | 45.0 |
| Fabricated metals | Mar | 27% | 21% | 52% | 53.0 |
| Semiconductors | Mar | 11% | 27% | 62% | 42.0 |
| Computers | Mar | 9% | 30% | 61% | 39.5 |
| Industrial machinery | Mar | 13% | 44% | 44% | 45.5 |
| Tooling | Mar | 16% | 25% | 59% | 45.5 |
| Transportation services | Mar | 22% | 20% | 58% | 51.0 |
| Energy | Mar | 21% | 17% | 62% | 52.0 |
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