Thursday, July 07, 2005

More on Steel Prices and the Auto Industry

Picking up on the recent posting about steel cost’s and the Automotive Industry. Andrew over at Steelonthenet, spotted an interesting report by Professor Peter Morici of the University of Maryland. Morici estimates steel costs at around 2.7 percent for motor vehicle production, and at about 3.1 percent for manufacturing industry in general. Whilst steel may be a critical material, its cost really is relatively small for most applications in which it is used.Furthermore the trend in steel prices over the past few years with the exception of 2004 has been downwards or “static”. Whilst I can accept that the automotive industry is having a difficult time the cost of steel is not a significant factor in the overall “build cost”. Indeed Morici concludes that US manufacturing is competitively disadvantaged by a very high dollar, by very high healthcare costs, by the high cost of lawsuits, and by the cost impact of strict environmental regulation - and that is it these factors, rather than high steel prices, that are responsible in the US for the demise of the manufacturing industry. These are issues that are already making life difficult for manufacturers in Western europe too.
Manufacturing and steel prices

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