[TheForge] scrap up

[theforge@mailman.qth.net]

NEW YORK (CNN/Money) - The Federal Reserve may not act worried about 
the prospect of a rise in inflation, but one of Fed Chairman Alan 
Greenspan's favorite economic indicators is flashing red.

The price of scrap steel, which has historically worked well as an 
indicator of where the economy is headed, has shot up more than 40 
percent the past year and is now trading near highs not seen since the 
mid-1990s.

"Scrap has always been a good indicator, because it feeds directly into 
consumer spending and capital spending," said Don Fine, president of 
Fine Financial Forecasting.

...As a private sector economist, Greenspan was well known for closely 
following scrap steel and indications are that his penchant for scrap 
has stayed with him during his tenure at the Fed.

...In the past, a sharp rise in scrap steel prices indicated that U.S. 
manufacturing demand was rising sharply.

...The value of U.S. "ferrous waste and scrap" exports to China in the 
third quarter rose by more than 80 percent over the third quarter of 
last year, according to the Commerce Department.  Schnitzer Steel, a 
major scrap metal player, said that it exported 373,000 tons of ferrous 
metal in its quarter ended Aug. 31, a 40 percent increase from what it 
shipped in the same period last year.

...It's not just rising demand that's pushing scrap steel prices 
higher, points out Bernard Lashinsky, an economist who consults for the 
steel industry, but constraints on supply.

Overall, the U.S. iron and steel industry has added very little 
manufacturing capacity over the past twenty years, according to Federal 
Reserve statistics.  During that time there's been an internal shift in 
the steel industry from blast furnace operations, which process iron 
ore, to electric furnaces, whose feed stock is scrap.

http://www.moneymag.com/2003/12/04/markets/scrapsteel/index.htm