Free Newsletter
Register for our Free Newsletters
Newsletter
Zones
Advanced Composites
LeftNav
Aerospace
LeftNav
Amorphous Metal Structures
LeftNav
Analysis and Simulation
LeftNav
Asbestos and Substitutes
LeftNav
Associations, Research Organisations and Universities
LeftNav
Automation Equipment
LeftNav
Automotive
LeftNav
Biomaterials
LeftNav
Building Materials
LeftNav
Bulk Handling and Storage
LeftNav
CFCs and Substitutes
LeftNav
Company
LeftNav
Components
LeftNav
Consultancy
LeftNav
View All
Other Carouselweb publications
Carousel Web
Defense File
New Materials
Pro Health Zone
Pro Manufacturing Zone
Pro Security Zone
Web Lec
Pro Engineering Zone
 
 
 
Editor's Blog and Industry Comments

Watch for trends in steel as a sign of where the economy is headed

06 January, 2009
The steel industry, having entered the recession in the best of health, is emerging as a leading indicator of what lies ahead. As steel production goes - and it is now in collapse - so will go the national economy, according to a report by Dilip Vishwanat in the New York Times.
Steel has replaced autos as the US industry to watch for an early sign that a severe recession is beginning to lift.

The industry itself is turning to government for orders that, until the September collapse, had come from manufacturers and builders. Its executives are waiting anxiously for details of President Barack Obama’s stimulus plan, and adding their voices to pleas for a huge public investment program - up to $1 trillion over two years - intended to lift demand for steel to build highways, bridges, electric power grids, schools, hospitals, water treatment plants and rapid transit.

Economists in the Obama camp said the president-elect’s proposals to Congress will include significant infrastructure spending that draws on heavy industry.

New spending should provide an immediate jolt to the steel business, which has already gone through the painful makeover now demanded of automakers. Steel mills were closed, companies were consolidated, hundreds of thousands lost their jobs and the survivors agreed to concessions. As a result, productivity shot up and so did profits, to record levels in the first nine months of this year. Even as the economy wobbled, steel held its own.

But then the recession hit in force. Steel goes into nearly everything made in America, from homes and office buildings to cars, appliances and light bulb sockets, and as construction and manufacturing wound down, so did the output of steel, plunging 50 percent since September.

The steel industry’s collapse closely tracks the alarming late-autumn swoon in the national economy, as the housing bust and the credit crisis converted a mild downturn into "a severe one that has much further to run,’ says Nigel Gault, chief domestic economist at IHS Global Insight, offering a view increasingly shared by forecasters.

Through August, steel production was actually up slightly for the year. The decline came slowly at first, and then with a rush in November and December. By late December, output was down to 1.02 million tons a week from 2.1 million tons on Aug. 30, the American Iron and Steel Institute reported. The price of a ton of steel is also down by half since late summer.

The cutback has been particularly hard on workers at the big integrated mills like those at US Steel and Arcelor Mittal USA, with their blast furnaces and coke ovens converting iron ore and other materials into steel. Operated at less than full capacity, these mills are less efficient than the equally large "minimills,’ like Nucor, whose electric arc furnaces can be operated efficiently at lower speeds.

So the plant closings have been mostly at the integrated mills, whose 50,000 workers - roughly 40 percent of the nation’s steelworkers - are represented by the United Steelworkers. The union says that early this year it expects 20,000 workers to be on furlough.

The industry, in response, is lobbying the Obama transition team for infrastructure projects that would require big amounts of steel. Mass transit systems are high on the list, and so is bridge repair.

Not since the 1980s has American steel production been as low as it is today. Those were the Rust Belt years when many steel companies were failing and imports of better quality, lower cost steel were rising.

Foreign producers no longer have an advantage over the refurbished American companies. Indeed, imports, which represent about 30 percent of all steel sales in the United States, also are hurting as customers disappear.

Then there are the wholesalers, known in the steel industry as service centers. They buy in huge quantities from the mills, building up inventories and selling to customers like a construction company that needs I-beams to build a shopping centre, or a manufacturer of auto parts in need of steel tubing.

Until recently, the inventories were bought on credit, and the service centers constantly replenished these stockpiles as steel was sold to end users. But now the service centres, unable to borrow money easily and reluctant to borrow anyway in these hard times, have stopped buying from the steel mills. They are selling off their inventories instead, raising cash in the process.
Bookmark and Share
 
Home I Editor's Blog I News by Zone I News by Date I News by Category I Special Reports I Directory I Events I Advertise I Submit Your News I About Us I Guides
 
   © 2012 NewMaterials.com
Netgains Logo