Essentially, domestic demand has been dropping for two years for steel's long products—merchant bars, special bar quality grades, cold-finished bars and rebar. A modest rebound in purchasing this year would bring end use back only to mid-1990s levels. Domestic facilities or equipment haven't been operating anywhere near full capacity because end-use needs have declined since 1999, although the mills say it's because low-priced imports now control 20% of supply and have driven spot market prices below operating costs. However, even major supplier Nucor Corp.—whose bar-mill capacity is almost 25% of supply—admits that bar markets "are affected by changes in economic conditions." Barmakers went on a spending spree for new plants and equipment while demand was rising annually from 1992-1999. But, consumption of basic carbon grades fell 14% in 2000 and another 10% in 2001 (to less than 14 million tons). So, even with bankruptcies, shutdowns and buyouts reducing the supplier base in 2000 and 2001, there's still too much barmaking capacity in the U.S., market analysts suggest. Even if the government provides temporary import relief through punitive tariffs, the intensified efforts of major manufacturing firms to consolidate steel bar purchasing probably will result in further mill consolidations in 2002 and beyond.

stundza@cahners.com