Chicago (Platts)--2Mar2009

The US government should provide cash incentives to American consumers
who turn in their old, high-mileage "clunker" automobiles, proposed veteran
steel analyst Charles Bradford at the Steel Markets North America 2009
conference, hosted by Steel Business Briefing, Monday.
"The federal government, instead of giving more money to US automakers,
should give a $2,000-5,000 rebate to consumers who turn in their 10-year-old
vehicles for shredding," said Bradford, president of Bradford Research Inc.,
New York.
"We've got to generate consumer spending again in the US -- that's what
drives this economy. If you turn in your old gas-guzzling, high-emissions
vehicle for the scrap heap, you should get a chit valued for a few thousand
dollars that can be applied to the purchase of another vehicle. We'll get
these old, fuel-inefficient cars off the road and also add to the supply of
shredded scrap," Bradford later told Platts.
Although his notion is designed to pull consumers into new-car showrooms,
Bradford conceded that such a chit might also be applied toward the purchase
of a used vehicle, but "even this would deplete the supply of used cars and
ultimately help new car sales."
Somewhat more bullish than most of the speakers at the conference
focusing on the North American steel market outlook, Bradford added: "I see an
upturn in steel demand close at hand -- not from the stimulus, the impact of
which is months away, and not from fundamental demand, but -- because service
centers have worked down stocks at a ferocious rate."
Bradford also noted that the housing market in the US could "start
building a little better come spring -- and when it comes to the appliance
market, it's all housing, housing, housing."
But any bounceback in housing markets that could benefit steel demand
would be from an extremely low level, noted John Anton, principal of the steel
service at Global Insight.
"This year, 2009, will be the worst year for housing starts in recent
times, and 2010 will be the second-worst year," Anton cautioned.
"You might see 500,000 housing starts this year and 600,000 next
year. While that's a 20% gain over 2009, it's still a horrible number."
He compared such forecast figures with more recent housing starts of 1.6
million units.
Meanwhile, Bradford pointed to several needs that could pull the US
economy out of its downturn. "Look at 1982," said Bradford, "forget the
Depression." He explained that during the Depression, 25% of the US was out of
work, compared with 10% in 1982, and compared to about 8% right now.
"The signal for a turnaround was Business Week's cover story in 1984
about the 'death of equities'. This created a bull-run stock market. So, we
need Business Week to cooperate again," quipped Bradford.
Among other necessary items to spark a turnaround in the US are a
recovery in China, further inventory reductions, and a weak dollar, according
to Bradford.
--Joe Innace, joseph_innace@platts.com