Steel Products
SMU Steel Summit: Beaulieu Sees Slower Rate of Growth on the Horizon
Written by David Schollaert
August 30, 2021
Economist Alan Beaulieu struck a cautionary tone in the forecast he offered to attendees of SMU’s Steel Summit last week. The pace and rate of rise in steel demand and production will level off in 2022, he predicted, after skyrocketing due to pent-up demand and government stimulus following last year’s COVID-driven disruptions.
“The massive buildup in demand will slowly dissipate and things will return, even if slowly, back to the way they were,” said Beaulieu, the president of Manchester, N.H.-based ITR Economics.
The popular economist detailed how most leading market indicators are signalling that the economy will be decelerating and experiencing some normalization. End costs across commodities are on the rise and industrial production has begun to edge down due to a rising deficit, stunting the private sector growth.
“The more the deficit rises the less the private sector is able to grow,” noted Beaulieu. “The transfer of funds that takes place make it incredibly difficult for the private sector work.”
The federal reserve is more than likely not going to raise interest rates yet, however, Beaulieu expects interest rates to edge up slowly next year.
The steel market will see a slowing in the rate of rise in 2022 as the economy eases next year, Beaulieu said. Leading indicators, such as the Institute for Supply Management’s downward-trending Purchasing Managers Index, provide a clear picture of deceleration in industrial production. The slowdown will impact steel production and cause steel prices to come off historic highs.
“Leading indicators are telling you what’s going on. The math works and it’s showing a slower rate of growth,” said Beaulieu. “The market is not going down or turning, the pace of rise is simply edging off and will lead to lower demand. Thus, lower industrial and steel production and therefore lower prices.
“The rate of growth, the rate of change is shifting. The business cycle is still positive, but it’s slowing down,” Beaulieu added.
By David Schollaert, David@SteelMarketUpdate.com
David Schollaert
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