Iron ore and steel among industries that were hit hard in the last recession
by David Fleschen
Bloomberg recently updated its prediction on the likelihood of the US experiencing a recession. In July the forecasters at the company had given a 38% chance of a financial crisis, but just three months later this increased to a 100% likelihood.
There are several reasons why it’s becoming increasingly certain that the US, and much of the Western world, could soon be plunged into recession. Contributing factors include the impact of the global pandemic, Russia’s war with Ukraine, crashes in cryptocurrency markets, and incredibly low consumer sentiment.
To predict which industry may see the biggest impact amid a recession, Vendavo has looked at the effect that the last decline in economic activity had.
They analyzed financial changes - including sales, value and gross orders - from 2007 to 2010 on around 13 different industries, from US agricultural and construction machinery to steel production.
The research revealed that iron ore prices were seriously impacted during the last recession, dropping by 49% from 2008 to 2009. Prices plummeted from $155.99 million per dry metric ton unit to $79.98 million during this period.
Similarly, steel production experienced a rapid decline in productivity during the same period with production falling from 91.90 million metric tonnes in 2008 to 59.40 in 2009.
Iron, steel and ferroalloy sales were hampered by the recession. In 2008, sales in this sector were strong at 150,700 million US dollars but the impact of the recession saw sales almost halved by the following year.
The production of steel, sales in the iron, steel and ferroalloy sectors and the price of iron ore recovered as the recession ended. Although the latter dropped dramatically again around 2015 due to the faster-than-expected increase in the supply of iron ore, prices have continued to grow despite the covid-19 pandemic.
Vendavo’s research also showed that, once an economic situation improves, industries like steel can bounce back quickly. Based on the specific data analyzed, these were the industry revenues that recovered most successfully after the last recession (percentage change between 2009 - 2010).
Source: Vendavo, Photo: Fotolia