Steel bucking U.S. recessionary trends
April 07, 08 by TheFleetIf you're new here, you may want to subscribe to our RSS feed. Thanks for visiting!
BY ANDREA HOLECEK | Source: The Northwest Indiana and Illinois Times
Even as the United States faces a recession, earning outlooks for its steel companies are as good as they’ve ever been, he said.
“In 2008, U.S. steel production should increase 5 to 10 percent, even if domestic demand falls 5 percent,” Parr said at a recent steel conference in Chicago. “In 2008, we should see record earnings, better sustainability and pricing as global market consolidation continues.”
“The operator of a single mill must keep the mill at full capacity, or perish,” Schweller said. “He can’t adjust production to demand.”
The domestic industry’s inefficient excess capacity, additional capacity in developing global markets, such as China and Russia, plus the fragmentation of the industry, are among factors that led to the bankruptcies of more than three dozen U.S. steel companies — including LTV Steel Co., Bethlehem Steel Corp. and National Steel Corp. — from 1999 to 2002.
The restructuring and mergers that followed allowed mills to act rationally, analysts said. In 2005, when steel demand slowed, the larger mills varied their production instead of lowering their prices, Schweller said.
“Consolidation in the industry will continue and create value,” he said. “Consolidation leads to a rational industry.”
