CHICAGO Timken Co. has
seen foreign demand for its diversified product line decline
since the second quarter, which is now affecting some domestic
sectors, said president and chief executive officer James W.
"Reduced demand for commodities
has translated into lower demand for mining, and oil and gas
drilling equipment, (and) is now impacting our steel shipments
in the United States," he said.
Timken anticipates full-year
steel sales will fall between 11 and 13 percent from 2011
Steelmaking ran at roughly 60
percent of capacity utilization during the third quarter vs. a
peak of 78 percent in the first half. The Canton, Ohio-based
company is still trimming output to respond to soft
fourth-quarter demand, so melting capacity will be at or below
50 percent through year-end.
Timken is also adjusting
inventory. Customers "overshot a bit earlier in the year,"
steel group president Salvatore Miraglia Jr. said. Excess U.S.
inventory of billets, engineered bar and seamless tubing is
magnified by imports "attracted by the healthy North American
energy market," he added.
"That total has to evaporate to
some extent," Miraglia said. "But its not terrible.
Well see a hangover of inventory liquidation into the
first quarter, but continuously lessening as we go. Some
customers have more or less reached the end of it; others have
Timken sees weak spot pricing,
but 85 to 90 percent of the companys tons are on
contractsome with two-year terms that run through
"We are having success with
rollover pricing (from old to new contracts), meaning
were not seeing much deterioration at all. We expect to
continue operating in that realm," Miraglia said. "All in all,
were looking at pretty flat pricing. What youve
seen this year is something you can expect to see next
Miraglias positive view of
next years steel profit picture is bolstered by the fact
that Timken chases higher value-added product lines and has
protected itself by backward integrating into raw materials and
recycling, which has "given us some stability," he said.
Timkens contract customers
are "bullish on (their) demand levels longer term," Miraglia
said, which means that Timkens incremental capacity
additionssome of which will start up in the second
quarter of 2013"will be put to very good use."