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Economy takes toll on processors' hopes: faced with a struggling automotive sector, the effects of mill consolidation and an iffy economy, toll processors are holding their breath as they head into 2008.

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EVEN BEFORE THREATS of a U.S. recession moved from idle speculation to front page news, toll processing executives were sounding cautious about their industry's prospects for the new year.

Interviewed before worldwide financial markets tumbled in mid-January, toll processors expressed reservations about the outlook for the first half of 2008, hoping the second half of the year held more promise.

Though 2007 was generally good for toll processors, the year ended with a thud. The final quarter saw a downturn in business activity, a shift that may stretch through the first six months of this year.

"The first nine months of 2007 were pretty decent," says Dave Detzel, director of outside sales for Voss-Taylor, Taylor, Mich. "We had good volumes and steel was moving well, with the lack of imports keeping the steel mills active. But in the fourth quarter, we saw a steady decrease in business activity. Everybody had a real good year for the first three quarters, but that last quarter saw a decrease in volumes'

That synopsis was echoed by Ed Panek, senior executive vice president of All Metals, Spartansburg, S.C. "2007 overall was a fairly strong year. We didn't see any real decreases start to come until the fourth quarter, when we saw a significant decrease."

The decline coincided with a slowdown in orders from the automotive industry, the major end-use market for North America's toll processors. As vehicle inventories started to climb above 100 days, automakers put the brakes on their builds, slowing production and extending holiday shutdowns. They've since resumed assembly operations, but at the slower November-December levels, executives say.

"The first half for sure is going to mirror the...

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