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Steel stays strong in 'Year of the Storm': looking back at the major industry news events of 2005 reveals a market surprised by the economy's strength, and concerned about dark clouds ahead.

Article Excerpt
AT THIS TIME LAST YEAR, mills and service centers were toting up their record gains of 2004, and wondering how long the good times could last. Today, after another remarkable year for metals, their mindset is much the same.

Looking ahead to 2006, however, the signs of an economic slowdown are much more clear. The U.S. economy performed better than many expected through the first three quarters of this year, with GDP growing by 3.8 percent. But the pace of economic growth has clearly slowed from the 4.6 percent in 2004. Some experts predict decent growth continuing at around 3 percent next year, others less than 2 percent, depending on what transpires in such bellwether sectors as housing, energy and automotive.

UCLA's Anderson Forecast predicts a sustained slowdown in the U.S. housing market that could cost the economy thousands of jobs next year, as new construction, new-home sales and applications for home mortgages are all trending downward. While housing will put the brakes on the economy, the researchers add, it should stop short of triggering a recession.

GM's recent announcement that it will close nine production facilities and cut production by 1 million vehicles underscores the changes taking place in the auto sector as the New Domestics win further market share from the Big Three. Auto industry observers fear that high gasoline prices will continue to add to soft consumer demand for new vehicles in 2006.

2005 will no doubt be remembered as the year of the storm. Given the unprecedented destruction Hurricane Katrina caused to the Gulf Coast, experts can only speculate on how much reconstruction efforts will affect the economy next year. A few steel mills and service centers reported relatively minor hurricane damage, but many of their customers continue to struggle with the logistical after-effects of the storm.

U.S. imports of steel declined considerably in 2005, as steel demand suffered from excess inventories. Domestic steel shipments declined around 10 percent due...

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