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Metals demand expected to grow in early 2014: Fed

Jan 21, 2014 | 04:32 PM |

Tags  Steel, metals, demand, capacity utilization, automotive, aerospace, energy, defense Federal Reserve Bank

CHICAGO — Metal suppliers and consumers in four Federal Reserve Bank districts have forecast a modest uptick in business activity during the first quarter, according to the Federal Reserve Board’s current economic conditions report, known as the Beige Book.

In the Cleveland district, fourth-quarter steel shipments were said to be stable or slowly increasing, with the strongest demand from the transportation and oil and gas industries but defense orders weak.

Cleveland district steel shipments are expected to be higher during the first quarter as sources cited in the report noted improving customer confidence.

A few steel producers reported reducing capacity utilization during January due in part to excess global capacity, but metal prices were rising modestly.

Manufacturers in the Chicago district were optimistic about 2014, pointing to expected strength in the automotive, aerospace and energy industries. The automotive and aerospace industries in particular were a source of strength in the district in the second half of last year.

Low service center inventories in the Chicago district continued to boost demand for steel and other industrial metals, and there’s been some additional pull from the housing market. Chicago district sources reported paying higher prices for steel and other metals.

Demand for primary metals in the Dallas district softened seasonally during November and December, according to manufacturers cited in the report. Metal fabricators, however, reported very strong demand and said sales were up notably from a year earlier. One fabricator said it was able to "pick the work (it) will bid on for the first time in a few years," according to the report.

Commercial aircraft backlogs are buoying manufacturing requirements in the San Francisco district, although many defense-related manufacturers expect to lay off workers due to delays or cutbacks in production contracts because of federal budget cuts.

Conditions held steady for western steel producers, who reported an upswing in demand for materials going into vehicles and aircraft, although capacity utilization remained flat.

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