Steel demand, prices seen sliding in 2008
ASD speakers see steel buying to drop to 97 million tons
By Staff -- Purchasing, 10/15/2007 9:45:00 AM
The steel industry is going to encounter another year of tough sledding for producers and distributors, according to speakers at an industry meeting this past weekend, who don't see an increase in purchasing.
They cited weakening job growth and consumer spending, profit disappointments for manufacturing companies that may reduce capital spending plans and continued weak end-user purchasing.
“It’s likely that 2008 will show slower real economic growth than 2007,” according to Deborah Allen Hewitt, president of Rutledge Research economic research firm in Williamsburg, Va. Speaking at Association of Steel Distributors’ 2007 Fall Meeting in Baltimore on Sunday, she agrees with low (2.2% of so) growth forecasts for the U.S. economy in 2008, saying that “consumer spending in 2008 is likely to be the lowest since 1981, causing a weakening of such key industrial steel-using markets as automotive, housing and appliances.” She projects that motor vehicle sales below 16 million units will keep regional assembly around 15 million cars and light trucks.
Tom Stundza, executive editor of Purchasing, agreed in his presentation that “U.S. and Canadian steel demand will vary by product in the coming months, but generally will be lower again in 2008.” Stundza projected that 2008 will be the second year in a row with a 6% decline in major appliance shipments and no growth in machinery manufacture. Upshot: Both speakers projected a 5% slide in consumption next year to 97 million tons—following an 8% dip this year to 102 million.
Steelmakers may face a heavy increase in steelmaking costs next year from expected increases in scrap and iron ore costs, which will force them to seek higher steel prices to customers in 2008. Stundza said “this is a market action that buyers won’t be inclined to just roll over and accept.” Hewitt agreed with the price-deflating scenario. The clinical associate professor of economics at the Mason School of Business at the College of William & Mary also said that foreign-made steel will be cheaper next year because of excessive production despite moderating demand. “Global steel prices will come off their cyclical highs in 2008,” she forecasts, “and that will have a price-depressing impact in the U.S. market.”
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