Monday, May 26, 2008

Back to Basics: Suddenly, A Bright Future for Old-Economy Firms in Industries Like Steel and Mining


LA Times -- The price of U.S. Steel's stock has shot up 1,000% in recent years (from $16 in 2003 to more than $180 this month, see chart above) as industrial America has been resurrected to meet the needs of a feverishly industrializing world.

"We're in the midst of 2 to 3 billion people around the world rising out of abject poverty and demanding they have a better living standard," said Daniel R. DiMicco, head of Nucor Corp., America's largest steel company. "That means we've got a 20- to 30-year bull market in basic stuff."

The new vitality is reflected in a major surge in exports of U.S. goods, up about 80% over the last five years, to $316 billion in the first quarter of 2008 from $176 billion in the first quarter of 2003, government figures show.Foreign demand has helped drive U.S. Steel from a loss of $420 million five years ago to a nearly $880-million gain last year. Mining giant Freeport-McMoRan's profit is up 1,539%, from $181.7 million to nearly $3 billion. Fertilizer maker Mosaic Co.'s earnings went from $54 million for all of 2003 to $521 million for just the three months ended in February.

Perhaps the most fiercely held assumption about the economy has been that U.S. manufacturers could never compete globally because Americans earned vastly more than foreign workers. During the last several decades, though, the wages of many American workers have not grown at anything like the rates they used to. In the last decade, they haven't grown at anything like wages in much of the emerging world. So the wage gap is narrowing.

3 Comments:

At 5/27/2008 7:30 AM, Anonymous Machiavelli999 said...

I work as an electrical engineer at a consulting firm. Our main clients are Great Lakes Steel and US Steel. When I tell people my line of work, they always want to tell me that I must be having a hard time and that I am in a dying field.

Little do they know, we have never been so busy since I have been here. As I type this right now, I have 3 different expansion projects on my desk at 3 different factories.

I am just a novice in the complex field of FOREX, but perhaps the falling dollar is natural and will bring the world economies into a more balanced situation. What worries me is that other governments might take steps to stop their currencies appreciating against the dollar.

 
At 5/27/2008 5:17 PM, Anonymous E. Harokopos said...

machiaveli,

Don't worry. In order to stop dollar debasing foreign central banks must purchase dollars and sell their own currency against it. Since not even supeermodels want to hold dollars this time around (as announced in the media), those central banks know that the only use for those dollars would be to invest it back in US debt and create a vicious circle.

Thus, the only one who can stop dollar debasing is the US.

E. Harokopos

 
At 5/28/2008 8:13 AM, Anonymous Anonymous said...

Machiavelli999,

Thanks for some perspective on old economy industries. We tend to hear very little about primary industries and manufacturing.

 

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