March 2005

Manufacturing and steel prices; an economists’ perspective on 2004’s steel market

Washington, DC— In an economic study released in February, entitled “Manufacturing and Steel Prices,” Professor Peter Morici counters recent concerns that higher steel prices may be a major factor driving manufacturing overseas. According to Professor Peter Morici, “In 2004 steel prices increased significantly. Some customers complained about rapidly rising costs and temporary shortages, and some critics charged high steel prices were driving manufacturing and jobs from the U.S. and causing cutbacks in production and employment. The fact is that industrial production and durable goods production increased significantly in 2004, as did employment in durable goods industries. Even among the major steel-consuming industries, steel represents only a relatively small portion of overall costs.”

“Steel prices have not been a significant factor affecting U.S. manufacturing. Within manufacturing, employment is actually faring better in steel-using industries than in other durable and nondurable goods industries. The profitability of steel using industries has matched other durable goods industries. Steel is a relatively small component of cost in most steel-using industries, and recent increases in U.S. steel prices generally have been matched by price increases abroad, leaving U.S. manufacturers at no comparative disadvantage.”

Professor Morici finds that problems faced by U.S. manufacturers are principally due to overvalued dollar and health care costs, not steel costs.

A copy of the complete analysis is available online at www.steel.org or www.steelnet.org.


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