Weak U.S. currency impact on European metal industry competitiveness with China

U.S. Currency

Analysis of the impact of a Weak U.S. Currency on European Products within the Metal Industry, and Synopsis of Competitiveness in China

The intent of this research proposal will be an examination of the impact of the U.S. dollar on European products, particularly with regard to the metal industry, and an analysis of the competitiveness of the U.S. with China. In particular the researcher hopes to determine what if any impact the weak U.S. currency with regard to European products may have on an already weakened economy in the next several years. As the U.S. economy has declined in recent years, its impact on industries including the metal industry must be examined. The weakened U.S. dollar may have enabled opportunities for increased competitiveness from a global perspective.

In addition the researcher will set about determining whether or not competitiveness is affected by Chinese exportation of metals to Western Europe. Specifically the researcher will seek to answer the following question:

"How does the weak U.S. currency impact European products and the U.S. And European competitiveness with China with regard to the metal industry?"

The researcher intends to approach this research question from an exploratory standpoint. Through examination of the current literature and recent historical data available on the metal industry and the weight of U.S. currency the researcher will draw logical conclusions related to the impact a weakened U.S. dollar has on European products.

The researcher hypothesizes that the weakened U.S. dollar has thus far had a positive impact on European products and enabled more competition to enter the market including competition from China.

Background to the Problem

Studies suggest that the market for metal products remains weak within the U.S. And Western Europe, and that a weak U.S. dollar/Euro exchange rate is contributing among other things to declining margins, putting producers outside of the U.S. At a competitive disadvantage when compared with other nations such as China (www.hydro.com,2004). The study will also examine the lack of exportation of U.S. goods to Western Europe, due in part to strong local markets for metal products.

The U.S. currency rate can affect European production if left unchecked. Currently Western World shipments of U.S. metal products are estimated at 22 million tones; production capacity is expected to remain the same if these figures remain stable, and it is possible that Chinese exports of aluminum will slow in 2005 (www.hydro.com,2004).

Significance of Study

This study is important as studies suggest that recovery to the global economy will remain slow in upcoming years, and the industrial output trend remains relatively minimal in Western Europe and the United States (Alhonen, 2003).

Cutbacks in material investments and capital goods have resulted in subdued investment trends which impact the global economy (Alhonen, 2003).

In particular technology industry companies and other organizations dealing in metal are realizing fewer orders and profits (Alhonen, 2003).

Demand for steel and non-ferrous metals in Europe has continued to remain low and weakened, and imports of metals from countries including China have been growing (Alhonen, 2003). This has resulted in the weakening of the Chinese currency related to the euro (Alhonen, 2003).

This trend can affect the competitive abilities of European operators and North American operators within the Far East (Alhonen, 2003).

Objectives

There are some indications that the U.S. economy is improving, yet the U.S. dollar is still weak (Triplett, 2003). This study will seek to determine how the weakening U.S. dollar will affect European markets and competitiveness with China, a main exporter to Western Europe at this time.

The conditions within the steel market in particular have been reported as declining for several years, but there is some evidence which suggests a change is occurring within the industry (Triplett, 2003). There is some evidence which suggests that domestic distributors might actually benefit from the weakening of the U.S. dollar, in fact it might enable further economic recovery (Triplett, 2003).

This study will seek to determine whether or not theses statements are valid, in order to determine the best possible avenue Europeans can take to remain competitive and U.S. manufacturers can take to help facilitate a more productive economy.

Conclusions/Recommendations

The aim of this research study is a qualitative approach to examining the impact the weakened U.S. dollar has had on European products, with a secondary analysis of the impact of the weakened dollar with competitiveness related to China. Based on the preliminary synopsis of the literature available it appears that the weakened U.S. dollar is actually benefiting the Western market in some ways. There is evidence suggesting that global economies and suppliers might be benefiting (Triplett, 2003).

As a whole however the metal industry is in a state of chaos and decline. The intent of this study will be in part to help determine effective methods for increasing the efficiency and productivity of the metal industry both in the United States and Europe. An exploratory study will enable the researcher to provide grounded conclusions based on scientific principles with regard to the impact the U.S. dollar has on European products.