China Construction Boom Boosts Steel Demand

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“You wouldn’t believe the amount of construction that’s going on China,” our friend, and director of our upcoming documentary reported upon his return from the Far East. “Construction cranes crowded every street.”

It’s looking like the construction boom isn’t just confined to China; according to the U.S. Census Bureau, “spending on nonresidential construction was up nearly 14 percent during the first three months of 2007.”

Demand for cranes and crane operators is the highest it’s been in 36 years – and to meet this demand, Morrow Equipment Company of Salem, Oregon, has been adding to its fleet of about 500 large-scale cranes that it leases to contractors nationwide, reports the AP.

And what do you need to build cranes? Steel…and lots of it. China’s construction boom is drawing on the same resources needed to manufacture these cranes, says Gary Vosper, Morrow’s advertising director.

“We’ve been told by the factory that they availability of high-grade steel is becoming an issue and affecting their level of production,” Vosper said. “Sometimes we’ll order a crane and we may not get it for 12 months.”

Demand for steel is flourishing right now…after all, not only is it used in the developing of these cranes – but in the buildings…power plants…highways and bridges that are being erected.

“The Sears Tower in Chicago, the nation’s tallest building, contains 76,000 tons of steel. The Twin Towers in New York used 200,000 tons of steel. Can you doubt that there’s money to make when steel demand goes up?” says Free Market Investor’s Christopher Hancock.

“For anyone in America who invested in the early 1900s, steel shot up an average of 66% per year…26 years in a row. This ‘second skyscraper boom’ should have an even bigger effect.”

Kate Incontrera
for The Daily Reckoning Australia

Kate Incontrera
Kate Incontrera is the managing editor of The Daily Reckoning. She is also the author of The Daily Reckoning's Weekend Edition, a weekly wrap-up of contrarian investment analysis.
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