Last Thursday, the U.S. Senate voted to pump another $2 billion into the Car Allowance Rebate System (CARS) - better known as "Cash for Clunkers" - after the program blazed through its initial $1 billion funding in just one week.
The initiative, which offers rebates up to $4,500 to drivers who trade in their older, gas-guzzling cars for new and more fuel-efficient models, has certainly gotten Americans buying cars again (although for how long, nobody really knows).
But dealerships aren't the only ones benefiting from the "cash for clunkers" frenzy. Industrial and precious metals have felt the boost as well.
Since CARS began on July 24, the spot price for aluminum is up 11%. Palladium has increased 5%. Platinum's up 6%. And just check out the GFMS Base Metal Index, which averages the LME spot prices for primary aluminum, copper, lead, nickel, tin and zinc:
Not too shabby. Although prices have backed off slightly in the past day or two, it's still enough to get some analysts waxing optimistic:
"It may not make a huge impact in tonnage, but the psychological impact will be greater than the material impact," Michael Locker, of steel industry consulting firm Locker Associates, said to Reuters about the impact of Cash for Clunkers. "It may not knock the socks off, but it gives people a real basis for hope."
But is this rally the start of something sustainable? Or are these prices just one-time blips?
Markets Of Steel?
Automobile manufacturing requires a cornucopia of metals: steel for car bodies; cast iron or aluminum for engines; even platinum and palladium for catalytic converters (the scrubbers that clean up exhaust fumes). And as inventories deplete and The Big Three restart their production lines, it seems like demand for metals is back on the rise.
Steelmakers in particular could use the boost, as traditionally they've relied heavily on the U.S. auto industry for revenue. Take Ohio-based AK Steel (NYSE: ), for whom automakers comprise nearly one-third its customer base. The steel producer took a gut punch when GM and Chrysler stopped production lines earlier this year: In the recent earning season, AK Steel posted its third consecutive quarterly loss of $47 million, with a 57% drop in shipments and a 65% drop in revenues year-over-year.
