Home | Business News | Browse by Publication | M | Metal Center News

Uncertainty flattens the forecast: though the vast majority of service center executives remain largely bullish, MCN's Optimism Index, for the second year in a row, hints at growing pessimism and concern about prospects for the metals market in the coming year.

Article Excerpt
WIDESPREAD UNCERTAINTY about the economy next year, a pause in metals-market activity that may be more than the typical seasonal slowdown, and perhaps a general nervousness about global political strife, have all contributed to an erosion of optimism among service center executives.

Each fall, MCN polls its readers to gauge their expectations for the coming year. To quantify industry sentiment, MCN asks respondents to rank their feelings on a scale from 1 to 6. Those indicating 1, 2, or 3 fall on the pessimistic half of the scale; 4, 5 and 6 on the optimistic half. Quantifying industry "optimism" helps to track the trend in service center executives' attitudes, which affect the decisions they make regarding expansion and contraction, raising or lowering inventory levels, increasing or decreasing manpower, making capital investments, etc.

Overall, 86 percent of respondents characterized themselves as somewhat or very optimistic about their prospects for the coming year. Though still a very high percentage, this compares to 90 percent last year, and 92 percent the year before, who calked themselves "optimists." Industry sentiment has been on the decline for two years and is at its lowest point since 2003, according to MCN's methodology.

Averaging all the responses reveals a 2007 Optimism Index of 4.5--down from 4.7 last year and 4.8 the year before. MCN began tracking industry sentiment in 2000, when the index was at 4.0. It rose steadily beginning in 2002, along with the U.S. economy and service center sales, until peaking in 2005.

Companies responding to this year's survey ranged from about $300,000 in annual revenues to more than $5 billion. The average service center reported 2006 sales of approximately $176.2 million, up about 4.3 percent from $169 million in 2005, and more than twice as high as the $76 million reported two years earlier in 2003 before the historic run-up in metals prices.

Small service centers, those with less than 20 employees, averaged $9.9 million in annual sales last year; midsize service centers, with 20 to 99 employees, averaged $36.4 million in annual sales; while large service centers, with 100 or more employees, averaged $448.2 million in annual sales. Calculated as medians (the point at which half the responses were higher and half lower), the typical small service center...

View this article FREE - Now for a Limited Time, try Goliath Business News
Free for 3 Days!