NEW YORK The domestic
steel market is unlikely to see a significant rebound in 2013
due to recessionary issues in Europe and an uncertain political
climate, according to Jim Tumulty, senior managing director at
investment bank Seaport Group LLC.
"The domestic outlook for steel:
Is the glass half empty or half full? We do not expect a major
rebound in 2013," Tumulty said during an Association of Women
in the Metal Industries regional dinner Jan. 14 in
Carlstadt, N.J. "We think Europe will remain recessionary,
theres negative growth in Germany (and) most of the
things that came as a part of the financial crisis remain."
"Suffice to say, were not
entirely constructive about the market for ferrous metals in
2013," he said.
Iron ore, which has recorded a
major surge in prices since the fall, has also been another
source of uncertainty in the marketplace due to a lack of real
demand, he said.
"I dont understand the
recent run-up in iron ore prices. ... The lack of
follow-through for scrap prices and the turndown on finished
product prices is further confirmation that the run-up is not
driven by repeatable fundamentals," said Tumulty, who worked on
a Seaport team that oversaw the sale of former steelmaker RG
Steel LLCs assets.
"Construction spending is still
not even close to where it was before the credit crisis and is
still at significantly depressed levels," he added.
Adding to the list of concerns
is the United States alarming
debt-to-gross-domestic-product (GDP) ratio, Tumulty said,
noting that it has remained in the 100-percent range in recent
"Everyone thinks of Greece, with
its current ratio of 146 percent debt to GDP. Well, it was 109
(percent) when Greece lost its ability to access the public
markets, and were only 9 percent away from where Greece
was. ... I dont think the public is recognizing this
enormous threat to their way of life," he said.
U.S. steelmakers have recently
enjoyed low-priced energy, which many say is a bright spot in
the current market. But Tumulty said that overregulation could
end up hurting the industry longer term.
"I think the continual divide
between the need to rebuild an industrial base and the current
agenda of the current administration is going to continue to be
a deep chasm and very adversarial process," Tumulty said. "I
think itll take a significant part out of the certainty
that business owners and managers need to take risks. It would
be a shame if we squander a serious energy advantage to build
our manufacturing base by being overzealous with
Looking forward, other issues
still remain to be resolved, including the upcoming debt
ceiling discussions on Capitol Hill. And with so much
uncertainty, steelmakers and manufacturers just arent
willing to make the investments they need to kickstart business
conditions, he said.
"Taxes? We do have some clarity on taxes, and thats
(theyre) going to go up. Thats not the clarity we
need," he said. "I know corporations are just sitting on
massive amounts of cash and they dont know what to do