Too little, too slow. But not necessarily too
late. That seems to sum up steel's verdict on the impact of the
American Recovery and Reinvestment Act (ARRA), better known as
the economic stimulus package.
Too little, because the amount of new demand
likely to be generated by the ARRA-anything from 2.5 million to
3.5 million tons of steel, depending on estimates-is a small
fraction of what has been wiped out by the economic slump.
Building new bridges, renovating highways, investing in school
buildings and constructing more wind towers are all worthwhile,
but they don't begin to compensate for the idling of
construction sites and auto plants across the country in the
first half of the year.
Too slow, because as we move into the fourth
quarter of what has been one of the toughest years in living
memory for the U.S. economy, the real hour of need may have
passed. Steel and metal prices have recovered from their lows,
and there are at last some indications that underlying demand
may be picking up, thanks to the "Cash for Clunkers" program
and the progress of the natural stocking cycle. The ARRA's role
in the recovery appears to have been tiny, although its
psychological impact may have been more important.
But too late? Perhaps not. At the end of last
year, when mills had cut capacity rates to below 40 percent and
steel share prices had plunged to bargain-basement levels, the
promise of a government-led demand boost was welcomed with open
arms. Because it hasn't yet materialized doesn't mean that it
won't be needed in the future.
Whatever you feel about the Obama
administration's policies-and we know they're generating strong
opinions throughout the industry-it's undeniable that the
President came into office facing an unprecedented number of
"emergencies," as one steel analyst described them. At the top
of the list was the state of the banks and the automakers,
which were broken and needed rescuing.
The steel industry has been through its own
crisis, and although there were, and will be, casualties as a
result of the credit crunch-particularly among smaller
companies most exposed to the auto sector, not to mention the
thousands of workers laid off or furloughed across all parts of
the production chain-the industry as a whole hasn't needed a
huge helping hand from government.
The economy remains fragile, however, and
just because the worst of the downturn appears to have passed
it doesn't mean the industry is out of the woods. All sorts of
problems could derail the recovery a fresh slump in the
financial markets, stagnation in the post-Clunker auto
industry, the continuing rationing of credit and, not least,
the impact of China, where an altogether more steel-intensive
stimulus program has sent steel demand to unprecedented highs
and in doing so has kept the country's exports well below last
If China stumbles, a fresh surge of steel
to U.S. shores could easily drive down prices. That might give
a short-term shot in the arm to steel buyers for
government-funded construction projects, but it risks
undercutting the mills' attempts to match production to demand
throughout the downturn and the nascent upturn.
Industry analysts and executives believe it
will be 2010 before the bigger bridge-building and construction
projects under the ARRA generate sizeable new demand for steel.
That's a year later than many would have liked, but not too
late to play a role in steel's delicate recovery.