The most interesting aspect of the steel business is the close relationship it has with the overall economy—it would be nearly impossible for there to be economic growth without corresponding growth in this sector. This is an industry that is at the very center of the economy, not only for the US, but also for many nations in the world. What happens in the steel sector drives much of what happens in many other industries, and there is a lot of flux in the steel market these days.
There were perhaps three major takeaways during the annual Steel Summit put on this week by the group at Steel Market Update. The first is that steel consumption is, as noted, remains a great proxy for the overall status of the economy. Right now, there is solid demand for steel used in the production of cars and other vehicles as well as for appliances. The drought in demand is for steel used in construction, the single biggest sector for the steel industry. The construction gains that have been noted in the residential community have not had much impact on steel, as this is not the building material of choice.
The second takeaway is that the steel industry worldwide continues to be heavily influenced by politics. Today, past government subsidies and protections are nearly all gone, but the US competes against countries that invest heavily in making certain their steel output continues to accelerate. That leads to dumping of steel on the market and other measures that create a very uneven playing field.
The third takeaway is that there is not a great deal of sympathy for the producers among those who consume it. Manufacturers want that steel as cheap as they can get it and don’t shed many tears if producers’ profits are meager.
- Armada Corporate Intelligence