CHICAGO | Steel consumption in the United States may not be meeting expectations for producers, but steel market analysts and consultants said Tuesday the country has “performed very well” this year to economic conditions in other parts of the world.
Robert Edwards, managing consultant for the London-based CRU Group, said it may take the nation about five years to reach an annual steel consumption level of 115 million tons, which is about 20 percent lower than the pre-crisis peak.
Edwards, who spoke during the CRU Group's sixth annual North American Steel Conference at the Westin Chicago River North hotel, said U.S. demand for finished steel products this year should rise 7 percent from 2011. He also expects government leaders will find a way to avoid the full extent of the “fiscal cliff” at the beginning of 2013. But even to avoid the combination of tax hikes and automatic federal spending cuts, the nation's economy will grow at an annual rate less than 3 percent in 2013 and 2014.
The recovery from the last recession has been “a completely different cycle than what we've ever seen,” said Timothy Hayes, metals equity analyst for Richmond, Va.-based Davenport & Co. He said the nation's economy grew at an average annual rate of 3.2 percent in the period between 1983 and 2008. Through 2016, he expects GDP to grow at an annual rate of 1.8 percent.
Edwards said operators of large U.S. steel mills have had reduced profitability this year as a result of pricing competition from imports. As imports find a home in the U.S. market, he has seen price differences from domestic goods range from $90 a ton to $275 a ton.
“The U.S. remains an attractive destination for mills and traders from other markets around the world,” Edwards said.
Next year, Hayes said he expects the steel market to reflect an overall slowdown of U.S. manufacturing activity despite bright spots in some sectors including automobile production. Edwards said steel companies should benefit from improved activity in that sector for the next few years as an aging vehicle fleet and expected population growth help production reach more than 17 million units in 2017.
In the next few years, Edwards said there may even be an opportunity add domestic production capacity to support larger markets for oil country tubular goods in energy exploration and transmission, and flat-rolled products in the automotive industry.
Raw materials may not reach peak levels seen in the last 18 months, but they are expected to “remain considerably above levels seen in the last decade,” Edwards said.
Growth in the U.S. steel market will be dwarfed by the steel industry gains expected for developing countries such as China and India, where consumption could rise by about 360 million tons over the next five years.
The CRU Group is London-based company that hosted the two-day conference for executives, suppliers, analysts and customers of the steel industry.