Monday, 10 November 2008

The Laws of Supply and Demand Are Not Mocked

Here’s a powerful illustration of economic theory in action. On the back of strong demand and rising input costs, the steel industry worldwide has spent the first nine months of the year raising prices. See for example these press releases from thriving European steelmaker Corus: 17 of the 30 announcements between January and September heralded price increases. In August they recorded higher turnover, deliveries, earnings, profits and return on capital for the group.

Then, last week, came this.

In order to align its production levels with demand in the European market, Corus plans to reduce its production Oct-Dec by 1 million tonnes of crude steel, equivalent to 20% of its output. Corus has now decided to extend the production cuts beyond December. Corus expects to produce about 30% less crude steel than planned during the two quarters to the end of March 2009. Consequently Corus will temporarily idle one blast furnace at each of its Scunthorpe, IJmuiden and Port Talbot works …”

They are acting decisively in response to what they find in the market: and they are not alone.

Demand up, costs up. Costs up, prices up. Prices up, demand down. The bust isn’t just in housing. When you've finished enjoying your moment of triumph, Gordon, perhaps you could tell us: did this ‘start in America’ too ?

ND

20 comments:

dearieme said...

The technology of blast furnaces means that "idling" one is a big decision. It's not like switching a car production line off for a few weeks.

Anonymous said...

Moment of triumph for brown? What exact triumph can that c&$t boast about?

Raedwald said...

Volvo truck orders worldwide Qtr 3 2007: 41,970

Volvo truck orders worldwide Qtr 3 2008: 115

Car manufacturers are in the same boat. And structural steels by the lack of new starts.

Still, look on the bright side. Falling steel demand and prices will mean the thieving pikeys around here will stop nicking the manhole covers.

But the streets will be full of burnt out abandoned cars again as the scrap market nosedives, meaning higher council costs ....

Paulie said...

Clearly this is entirely, and soley Gordon Brown's fault.

Dennis said...

Corus deserves to go bankrupt for coining the transitive verb "to idle".

On second thoughts, there are quite a few things I wouldn't mind idling. Indian call-centres. Loyalty schemes. Premium-rate telephone numbers. The BBC. And of course, politicians of every stripe.

Let us make Britain into a tax-haven. Let us leave the EU forthwith. Let us reduce income tax to 10% with a PA of £15,000. Let us abolish CGT. Let us trim the public sector accordingly. Let us, in short, reward enterprise, allow the market its head, and become prosperous once more.

Mitch said...

I work for a small engineering company that uses exotic alloys to make parts for power stations(nuclear and steam) and some suppliers are quoting 9 months delivery WTF?.
How do you plan for that this stuff is very expensive?

AntiCitizenOne said...

The bubble is in Money. The worlds governments engineered massive credit bubbles through regulation. Governments have abused their monopoly on currency.

Now the are claiming a "market failure" and hope to seize even more power!


Don't let them get away with it.

AntiCitizenOne said...

Dennis,

Better to abolish VAT, Income Tax, NI, CGT, IHT and stamp duty. Replace it all with a Land Value Tax.

Instead of benefits for people who fail, set the LVT high enough to provide everyone a citizens dividend.

Nick Drew said...

dearieme - you are spot on, of course, & big chemicals plants are the same

Who knows: but weeks could stretch ...

anon - forgive my feeble attempt(s) at sarcasm

Mr R - you are characteristically balanced and far-sighted in your assessment

your last point of course, hints at all manner of complex consequences for environmental issues: price of commodities down, less incentive to conserve etc; but then again, less economic activity, less effluent ... what's a greenie to think ?

One thing's for sure: less investment in new kit - so it's a death-spiral race between declining demand and declining capacity: which will win ? will the lights go out ?

Paulie - if you needed to nominate one candidate for the Guilty person, he's in pole position

(you're not Derek Draper trying to be subtle, are you ?)

Dennis - welcome ! & since our mutual friend uses it as both adjective and noun, it may as well be verbed, too

there are some in the 'international community' who consider the UK a tax haven already

Mitch - welcome also - & whisper it softly but I'm told that certain purveyors of highly specialised grades of steel are not, how shall we say, beyond reproach in, err, the areas of interest to the OFT ... (FAOD I am not referring to Corus)

ACO - yes, Brown does seem to be enjoying himself to an unseemly degree

then again, look at the US auto industry, begging for a place 'neath the government's wing

Paulie said...

I nominate the shareholders of Corus to take the blame for this if that's OK with you?

(That's the second bit of Derek Draper-related paranoia I've seen today - what's going on?)

What a lot of bloggertarian memebots you seem to be attracting here, by the way. It's like a religious cult, except those millentarian tend to pipe down when the world doesn't end on the days they predicted.

And how they all hate liberal democracy as well!

Crash caused by regulation - my arse!

Anonymous said...

Paulie--your arse talks more sense than the rest of you

Paulie said...

Anonymous insults. The breakfast of champions....

AntiCitizenOne said...

Paulie,

You're having problems digesting the fact that the government caused this recession, and they are going to turn it into a depression (like FDR did) through new and even worse regulation.

Governments have a monopoly on currency which they abuse to the detriment of the people (mostly through inflation).


Here's a good article for you to try to understand.

http://georgereisman.com/blog/2008/10/myth-that-laissez-faire-is-responsible.html

Paulie said...

Aw gawd. So many memebots! So little time!

Modesty should forbid me from saying that I think I dealt with this bullshit about how it's all the fault of the Community Reinvestment Act quite well in the comments here...

http://timworstall.com/2008/09/24/never-trust-a-hippy/#comments

... mainly because this article deals with the whole thing a lot better:

http://www.slate.com/id/2201641/pagenum/all/#p2

Now, could any of the self-styled 'libertarians' please answer me one question please? I've been charging around every comments box on the intertubes asking for it, and I've not found a taker yet: Can *someone* please explain if it's possible to argue for laissez faire capitalism respectably without specifically arguing for representative democracy to be abolished?

And if representative democracy is - as has been *proven* over the last couple of months - entirely incompatible with market libertarianism, why are there no liberartians writing articles about how Parliament should be abolished?

Oh yes, if you're not prepared to step up to the plate and answer this question, do have the decency to sign this, willya?

http://drinksoakedtrotsforwar.com/2008/10/11/download-and-circulate/

And... hey! Here's a song for ya!

http://www.youtube.com/watch?v=9Jn8K8EA7-Q


Thanks!!

AntiCitizenOne said...

Paulie,

It sounds like you are losing the plot.

Libertarians understand that the total democracy that simpletons like you want is really a disguised form of mob-rule.

two wolves and a sheep voting on what to have for dinner etc.

Democracy HAS to have boundaries and these means the state has to be simply about administrating the common land, not ruling the people.

Now that I've indulged your little off-topic insanity maybe you could have a try at explaining how the government isn't at fault when it created the credit/debt bubble that caused the mal-investment that caused the recession, that the government tried to hide with inflation and bailouts that will cause a depression.

Face it, the root cause of this problem is the government.

Paulie said...

Argue for the abolition of Parliamentary Democracy then, just so that everyone can have a good laugh at your experimental extremism.

And don't call me a simpleton, you autistic twat.

AntiCitizenOne said...

Paulie why? You argue like a simpleton, and are unable to understand simple concepts.

I argue FOR constitutionally limited democratic government.

Democracy is only useful as you can get rid of bad administrators after a time. While in power an elected socialist can do just as much damage to the country as an unelected one.

That's why we need to limit government.

Paulie said...

I read quite an interesting article recently about the very high level of undiagnosed autism.

In all charity, I would urge you to book into an NHS doctor for a check-up (those private shysters just tell you whatever they think will get you coming back to pay a bigger bill next time).

In the meantime, is 'constitutionaly limited' a euphemism for 'we still let you vote as long as it doesn't change anything'? Is this some sort of liberty-fetish? There's a lot of it around, I see, but thankfully, it's really going to go out of fashion shortly.

Keep that blog of yours going, by the way. It'll be a risable museum peice shortly!

PS Have *you* ever met one of your own breed of libertarians anywhere else - apart from on teh interwebs? I'm beginning to think that you are all just a situationist prank of some sort.

Come clean - are you that bloke from the KLF?

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