Problems in the U.S. mortgage market are meddling with the metals market, another example of the far-reaching impacts of the housing downturn, subprime mortgage meltdown and credit crunch.
Bloomberg reports: “A slowdown in North America and the trouble in the broader financial markets have really hung over metals in the last few months and had a big impact,” according to Kevin Tuohy, a trader at MF Global U.K. Ltd. in London, as investors worry about the subprime fallout on metals such as copper, which is used in residential pipes and wiring.
“Copper fell for a second consecutive session in London on speculation that a slump in the U.S. housing market will extend into next year and further damp demand for industrial metals,” Bloomberg reports, and nickel and aluminum also fell. Tuohy said in the article, “We expect more fallout in the first quarter before things start to improve.”
The Sydney Morning Herald also reports that nickel “will lead a decline in industrial metals this year as stockpiles expand and demand slows with the U.S. housing market,” according to a survey of analysts, and industrial metals are falling for the first time since 2001 as the U.S. housing market downturn has cut demand for other metals such as zinc and tin.
How is the housing market faring? The U.S. Census Bureau and Department of Housing and Urban Development reported last week that the rate of new-home sales hit a 12-year low in November, while the National Association of Realtors reported today that the sales rate for resale homes was down 20 percent in November compared to the November 2006 rate.
And a Standard & Poor’s/Case-Shiller price index for 20 major U.S. metro areas fell 6.1 percent year-over-year in October, while the Realtor group reported a 3.3 drop in the median price of resale homes in November compared to November 2006.
The Institute is going one step further in predicting sharp drops in a wide range of products, from roofing materials to plastics and steel. We believe the subsequent slump in new housing construction and renovations will result in large inventories of unsold construction products. That, we believe, will lead to reduced production, layoffs and add to the present recession.