The freeze in the housing market has had a
chilling effect on the amount of steel being consumed for use
in major appliances like refrigerators and stoves. The number
of new homes being built doesn't tell the whole story, however,
being just one element affecting appliance market health.
To get a better read on the appliance market,
ArcelorMittal managers point to multiple sources.
"There are at least three factors that drive
major appliance sales the housing starts, the replacement
market and the remodeling market," Amy Ebben, marketing analyst
at ArcelorMittal, said. "The housing is easiest to watch. It
has hard and fast stats."
U.S. Census Bureau data shows housing starts
fell between 30 and 35 percent in the first quarter compared
with the first three months of 2006, she said. But major
appliance sales in the United States were down just 6.6 percent
through May vs. the first five months of last year, according
to the Association of Home Appliance Manufacturers. "That shows
the other markets have remained fairly strong," Ebben said.
And that's good for ArcelorMittal and other
steelmakers that produce the metal used to manufacture major
When it comes to remodeling, other factors
like consumer spending, employment and interest rates also play
a role, Roy J. Platz, ArcelorMittal's director of marketing,
said. "There's been relatively good consumer spending through
the first five months of the year and we've seen a very strong
employment picture with positive wage growth." These factors,
plus more people refinancing mortgages and taking out
lower-interest home equity loans, have led to remodeling
projects that include new appliances. "You can understand
trends, so you don't have to have hard and fast stats," Platz
The executives declined to specify just how
far ArcelorMittal's steel sales for the appliance market have
"We'd love to see appliances a bit stronger,"
Platz said. "But they're not down as much as they might be,
given the dip in housing starts. We don't see a strong recovery
in the housing market maybe through 2008. We're looking at a
fairly lengthy drought on that end. But by the same token, we
see the economy improving quarter to quarter. Everything else
is looking positive except housing; even autos look
AK Steel Corp., Middletown, Ohio, also has
seen appliance, construction and manufacturing sector business
decline with housing starts. However, the company anticipates a
turnaround, James L. Wainscott, AK Steel's chairman, president
and chief executive officer, said during the company's
first-quarter earnings call earlier this year. "Based on what
we see and hear, the worst of the housing slump has passed and
that sector should show an improving trend through 2007."
An AK Steel spokesman declined to discuss the
company's current status on these sectors, preferring to keep
all comments within the scope of the public calls.
One positive trend that ArcelorMittal has
seen in regard to appliance consumption is that baby boomers'
children are growing up. "There are fairly positive
demographics as Generation Y comes of age and starts household
formation," Platz said. "And you have us baby boomers still
Those new homeowners and remodelers have
turned increasingly to stainless steel as a style. "Stainless
has been popular for a while," Platz said. His company produces
both carbon and stainless products worldwide. "I don't know if
stainless is here to stay, with the fickle nature of
The high price of stainless steel resulting
from increased nickel costs has been driving some substitution.
Allegheny Technologies Inc., Pittsburgh, said appliance makers
have been switching to less-expensive stainless material as a
way to lower their costs while maintaining the look consumers
ATI, for example, saw a significant volume of
Type 304 cold-rolled sheet sales replaced with Type 201
stainless during the first quarter vs. the same period a year
earlier, L. Patrick Hassey, the company's chairman, president
and chief executive officer, said earlier this year during the
company's quarterly earnings conference call. Type 201 has
about half the nickel content of Type 304. "Customers in the
food equipment and appliance market have switched and others
are switching every week," he said.
ATI failed to return numerous calls seeking
Although the appliance market is soft overall
for steel manufacturers, other areas of business are making up
for it. "Construction and energy is extremely strong," Platz
said, "so that's getting us through this slow spot in the
economy. There certainly have been other areas of