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Article Excerpt
While carbon steel prices have declined sharply from last year's record highs, stainless has seen more modest softening. Most experts view this as more of a normal seasonal slowdown, however, than a harbinger of weakness in the second half.
Christopher Hummer, managing director of Metal Strategies Inc., West Chester, Pa., points to the widely publicized turmoil in the automotive sector as one source of weakness. Automotive exhaust systems consume one-third of all stainless sheet, he notes.
Automotive has been negatively affected by the surge in inventories of carbon, and to a lesser degree, stainless steels, weighing down the profitability of automakers and their parts suppliers. "An excess of material has been a problem," Plummer says.
The high price of oil and gas has "caused a bit of a shock to the manufacturing sector in the past six months," he adds.
The high cost of energy has been a drag on operating rates and capital investment in many manufacturing sectors. Operating rates for U.S. manufacturing have hovered around the 77 to 78 percent level, yet capital spending has lagged at 5 to 6 percent.
"Heavy manufacturing has been slow in this business cycle to make investments," Plummer says. "There is definitely pent-up demand for investment, slowed by general uncertainty, the higher oil price, and issues with China."
He points to signs of a rebound in commercial and office construction as a bright spot for the economy in the second hale Metal Strategies forecasts 5 to 7 percent growth for nonresidential construction in 2005.
Housing construction "continues to defy logic" and looks to remain robust this year and next, Plummer says, which is good news for appliance makers and their...
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