IC 8451 A Quantitative Economic Analysis And Long-Run Projections Of The Demand For Steel Mill Products

This report presents preliminary results of a study undertaken to investigate quantitative characteristics of the demand for steel mill products and its major end-use components. The major end uses included in the study are the steel mill products used in construction, in automobiles, in producer durables, and in consumer durables. The main objectives of the research underlying this study are as follows: (1) To formulate and estimate the empirical demand relations for steel and the four major end uses in the United States; (2) to measure and calculate the responsiveness of the U.S. per capita steel consumption with respect to the changes of the steel and other nonferrous metals prices; (3) to determine and quantify the relative importance of the underlying demand explanatory factors in contributing to the average year-to-year increases (or decreases) of the U.S. per capita steel consumption; and (4) to adapt and use the estimated demand relations in making projections of the U.S. future demand for steel and the major end-use components. After extensive preliminary investigation, three versions of simple linear demand relations are selected and estimated by means of ordinary least squares (OLS) method. The annual data for the period 1947-65 are used in the estimation. Direct and cross price elasticities of demand are computed for each of major end uses. The relative importance of demand explanatory factors in contributing to the average year-to-year changes of U.S. per capita steel consumption are also calculated. For making projections, a simple autoregressive time trend model is used in estimating the future values of independent variables. Since the estimated demand relations are valid for projections only if the estimated parameters can be assumed to be unchanged in the future, and consequently, the projections derived in the study should be interpreted accordingly.