CHICAGO Steel demand will rise next year on strength in the automotive and energy sectors, but consumption could use a further boost from construction, according to industry analyst Christopher Plummer.
"We have steel consumption moving up about 5 percent for full-year 2013 vs. 2012," the managing director of West Chester, Pa.-based Metal Strategies Inc. told AMM.
Automotive build rates in the United States and the North American Free Trade Agreement region jumped 20 percent this year, and Plummer projects "a very healthy rate" of growth in the "high single digit(s)" for 2013.
And he expects the energy pipe and tube market to grow about 10 percent in 2013 after a continued correction to oversupply, including import tons. "The inventory still has to be cleared out," he said. "There may even be a trade case filed to deal with the imports."
But the construction market holds the greatest potential for steel consumption growth. "Across all steel products, that sector will account for 30 to 40 percent of steel demand," Plummer said. "We are at the lower end (of the range), but may have broken through. All subsectors except public works have improved."
Although nonresidential construction activity will be coming up from a "very low trough," Plummer predicts a 10-percent improvement in activity during 2013 vs. this year, when growth has exceeded 6 percent.
Still, that means the market is 50 percent below pre-recession levels. At that time, nonresidential construction accounted for 60 percent of all construction steel consumed. Public-works projects, which make up 30 percent of construction steel use, are still "in a negative direction due to constrained budgets," Plummer said.
Housing starts, which the U.S. Census Bureau said rose 28.2 percent in the first 10 months of this year vs. the same period last year, are poised to rise 15 to 20 percent next year. That "sounds like a stellar performance," Plummer said, "but thats coming off extraordinary lows and is still 50 percent below peak 2005 levels."
Demand for appliances, which is tied to housing, has consistently tracked flat to slightly negative but has started to improve more recently, Plummer said. "We are looking for growth of 5 percent linked to the housing recovery."