Name: Seowon Jung
Instructor: Barbara Ross
Source: Wall Street Journal, B1, Sep-29-2008
Still makers in the U.S decided to reduce outage because demand for steel has been decreased by the credit crisis. Besides, automobile and construction markets are becoming slowdown. Some of steel makers predict and already provide against emergencies that they will not keep earning revenues in the years second half. Although the some of law material costs were decreased, it seemed that didnt give any effects. Therefore, they have planned to reduce output by about 15% in this year.
The steel is raw material to build roads, bridges and office buildings. The reason of decreasing demand for steel is that some projects are postponed or held by unpredictable financial market; and slowdown in automobile and construction markets. Moreover, the steel buyers are purchasing only what they immediately need; and they do not want to overstock the steel in their factories because the price of the steel might be increased later. However, unfortunately, demand from other countries will not be substituted for domestic growth. Therefore, because the demand has been decreases, supply and the equilibrium price will be decreases. Especially, in this case, equilibrium quantity and demand will be decreased. Because, the reason of decreasing demand for the steel is not only due to high price but also the credit crisis. Besides, many steel users dont want to overstock the steel in their factories and want to use immediately the steel as soon as purchasing. Therefore, equilibrium quantity will not be increased. Besides, there is another reason about decreasing supply. The steel maker decided to reduce outage.
In conclusion, the related market, which is every market using the steel such as automobile, construction, heavy machinery, and military weapons, will be depressed. Equilibrium quantity and price would be placed a specific point. Demand started to decrease, and therefore supply price, and quantity will be decreased. Furthermore, equilibrium quantity and price will be decreased, too. So, price, demand, supply, equilibrium quantity and price will be decreased. Therefore, only the customers gain, the steel users such as the construction and automobile companies lose due to slowdown in their market, and steel maker will be lost too due to the steel users.