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Slow and steady (might) win the race: the steel industry continues to grapple with some fundamental problems, such as the solvency of weak players and higher raw material costs, but rising demand and pricing hold promise for next year.

Article Excerpt
North American steelmakers are encouraged by the recent uptick in demand, and expect 2004 to be a better year. But the uncertainty about how much better, due to high energy and raw material costs and the shrinking domestic manufacturing base, remains cause for concern.

On the demand side, the pickup is in its very early stages. "The U.S. economy is starting to show some signs of life, but up to this point the market has been just as depressed as it had been the last two years, and continues to be near recession levels," says Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa.

"Demand ... is better than it was this summer, but still not fantastic," says Scott Montross, vice president of marketing and sales for Oregon Steel Mills Inc., Portland. "Manufacturing has not picked up to the same level as the stock market. Both manufacturers and service centers are still being careful about building inventories. They are still not sure what will happen to pricing going forward."

For the first eight months of 2003, total steel shipments grew 4.5 percent vs. 2002, and sheet shipments performed even better, up 7.5 percent. "Toward the end of last year, because of all of the volatility in 2002, a lot of inventory built up," says Jim Kutka, vice president, commercial, for U.S. Steel Corp. "Because of that, the beginning of this year started off slow while those inventories worked through the system. Now we are back more of a normal shipping pattern."

John Tulloch, senior vice president and chief commercial officer at Ipsco Inc., observes a similar trend. "Order bookings have improved steadily in the last few months, from both OEMs and service centers--especially service centers," he says. "It is not a rapid increase. What we are seeing is a slow, methodical pickup in demand."

Dan DiMicco, vice chairman, president and CEO of Nucor Corp., is less optimistic about the state of the industry. "Demand isn't strong. Manufacturing is depressed. While we are seeing some signs of a beginning of a recovery, I don't think any sector is strong as far as price," he says, blaming much of this on a migration of the U.S. manufacturing base overseas, particularly to Asia.

"Businesses are moving offshore at an exponential rate. Something is structurally wrong and we need to address it," he says. "I've never seen a recovery where jobs keep going away like this. If we keep losing our customer base, there isn't going to be a domestic steel industry."

He favors government intervention in...

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