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'Just a really ugly situation': mill shutdowns and auto industry doldrums represent a double dose of bad news for toll processors.

Article Excerpt
THE TRYING CONDITIONS facing steel mills and service centers are, not surprisingly, a major headache for toll processors, as well. If the mills aren't producing material and the service centers and end-users aren't buying, then toll processors' phones stop ringing.

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Steel producers and distributors throughout North America are feeling the effects of the recessionary market, though the gruesome conditions may be taking an even bigger toll on the processing industry. With toll processors' strong connection to local mills and their heavy participation in the North American automotive market, the outlook for processing material for a fee is bleak at the moment.

"I've been through three of these [downturns], between times I was with the mills and now as a processor, and this is far and away the worst," says John Stroud, plant manager at Arlington Metals, Sawyer, Mich. "It's just a really ugly situation."

And, as Stroud says, the ugliness is exacerbated by the uncertainty. "The problem I see is nobody has a really good idea when it's going to turn. There are an awful lot of unknowns out there."

What is known is almost uniformly negative. The American automotive industry, which has been weak for the past two years, is expected to decline even further in 2009.

Just over two years ago, North American automotive production was at 16.5 million units. The most recent forecasts call for 10.5 million light vehicles in 2009, a 36 percent decline from 2006.

Even that number may be optimistic. Beleaguered Big Three duo General Motors and Chrysler essentially took the month of January off, and were...

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