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Galvanized sidesteps the soft spots: the outlook for galvanized steel remains positive in spite of weakness in the auto, housing and appliance markets.

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DESPITE CONCERN ABOUT THE U.S. economy and softness in such major markets as automotive and residential construction, most experts predict growth in demand for galvanized steel in 2008, thanks in part to plummeting imports and replenishment of lean inventories.

Domestic mills already have announced two price increases this year for the corrosion-resistant zinc-coated coils and more could be forthcoming.

"Demand has been fairly soft, though not depressed," says Ladd Hall, executive vice president of Nucor Corp. Despite production cuts by North American automakers and the slowdown in new-home construction, which affects demand for galvanized products in the associated appliance and HVAC sectors, he predicts that 2008 will be a decent year.

But galvanized steel distributors won't necessarily benefit as much from the decline in foreign imports as their mill suppliers due to the difference between true demand and apparent domestic consumption. Roy Platz, director of marketing for Chicago-based ArcelorMittal USA, explains that over the past three years true demand for hot-dipped galvanized steel has been relatively flat, ranging from 16.5 million to 17 million tons a year. Most of the fluctuations in steelmakers' order books have come from the supply side, through swings in service center inventories and imports.

The story is a bit different for electro-galvanized steel, which generally is not sold through distribution and is used exclusively by the automotive market, primarily the Detroit Three. As a result, demand and pricing of electro-galvanized have declined in tandem with production cuts at General Motors, Ford and Chrysler. Few New Domestic automakers (such as Toyota, Honda and Nissan) use it at all, says Platz.

U.S. apparent consumption of hot-dipped galvanized totaled about 16.6 million tons in 2007, down 12.2 percent from 18.9 million tons in 2006. As much as 1 million tons of that decline resulted from inventory liquidations, primarily at service centers, however, which suggests that real demand is healthier than it may appear, Platz adds.

After trending down all year,...