NEW ORLEANS The steel
market should see flat to modest growth this year, according to
industry analysts, as a number of sectors dont expect to
have the same growth levels seen in 2012.
The growth seen in the
automotive, home appliance and defense industries last year
hasnt carried into 2013 as strongly as expected, analysts
and market participants said during the Critical Commodities
Conference hosted by the American Institute for International
Steel and the Port of New Orleans.
This year "is off to an
unusually slow start. There were some big changes. SBQ (special
bar quality) and OCTG (oil country tubular goods)both of
those markets have cooled dramatically in the face of
overbuying in the first half of 2012," according to Mark L.
Parr, managing director and steel analyst at Cleveland-based
KeyBanc Capital Markets Inc. "Pricing power has not been
restored despite imports coming off here in early 2013. And our
anecdotal inputs ... every time we go out and make a round of
calls, the comments are that things continue to feel
The demand outlook for the
energy end markets, among others, looks "fairly flat this
year," Parr said.
While automotive production is
expected to increase, those levels will remain in the single
digits, particularly after a "very strong" 2012, he said,
noting that the home appliance sector is also set for
"Looking at the defense budget
procurement, things continue to look very negative. Part of
that is ending wars and part of that is sequestration," Parr
But not all steel-related news
for 2013 is grim. Construction is expected to see a modest 7-
to 7.5-percent pickup after seeing growth of about 5 percent in
2012. Participants tied to the shale plays in particular,
including those who manufacture alloy and high-quality niche
steels, can expect gains in years to come due to the increased
need for more technical horizontal drilling and the favorable
outlook on shale gas in the United States.
Yet while the domestic markets
look flat, the trading community should expect a difficult road
ahead due to short lead times and recent softening in U.S. hot
band prices (
amm.com, April 10).
"Customers are less willing to
go offshore because of price volatility," according to Richard
S. Dougherty, vice president of sales and marketing at the
Cargill Ferrous International steel trading division of
Minneapolis-based Cargill Inc. "Peoples purchasing
patterns have changed."
The iron ore market is heading
into oversupply, driven by Tier I, II and III producers all
expanding production, he added.
"The trend is negative for
import momentum," according to Parr.
Looking forward, some say that
for fundamental changes to happenfor real growth in the
marketsa combination of adjusted expectations, reduced
supply, a renewed construction sector, and a greater spread in
pricing between domestic and foreign material must come to
"One glaring piece of the market
is that construction hasnt come back, but its
recovering quickly," Parr said. "Were moving into a scary
time right now into the second half. There are high
expectations, but the economy is far from fully recovered."