Even before the short-lived federal government shutdown threatened to disrupt or even destroy the fourth-quarter economic--and, by extension, metals industry--performance, many were saying that the years best days were already behind it.
In August and September, some metal players at conferences and in private discussions began voicing the view that January and the first quarter started off relatively promising but then everything deteriorated quickly and went downhill. Uncertainty in Washington, this narrative went, had cost the country a chance at a more meaningful, lasting and hopeful industry recovery, at least for this year. But is that true? The answer depends on the type of metals involved as well at what aspect of the economy is being examined.
First, some general economic numbers (the U.S. gross domestic product and unemployment rate so far this year):
Even with part of the third quarter estimated (the government shutdown halted the flow of official reporting), its clear that GDP is growing faster than at the start of the year and that unemployment has gone down. Although its true that in neither case is the movement enough, both signs are still better than at the start of the year.
Those hard numbers look at events that have already taken place. Sentiment indices, which look at how people feel about economic conditions, tend to be forward looking. Two important measurements for the metals sector are the consumer confidence index and the purchasing managers index, which gauge perceptions about where the economy is heading:
Both measurements are stronger today than in January, so people at least are feeling better about the economy than they were at the end of 2012.
More specifically for the metals sector, vehicle sales and new home sales are indicators that can have a direct impact on business:
There are some signs of weakening here. Auto sales slowed in August and September, as did new home sales in July and August, which were weaker than in any months since the early spring. So how have those two sectors potentially affected steel and aluminum? The chart (top right) shows monthly steel production and service center aluminum shipments for the year to date
Steel is stronger than at the start of the year, although aluminum had a setback in September. Still the numbers suggest that demand for metal products generally has improved over the course of 2013. But margins and profits depend on sales prices, of course, and this chart shows average prices for hot-rolled coil, aluminum and titanium since January:
Aluminum and titanium prices have dropped, and although steel prices for the most part either have been steady or risen slightly this year, there is some evidence to suggest there may be some merit in some markets to the idea that the year has slid since January.
The conclusion: It would be wrong to say that the best days of 2013 were in January or even the first quarter, or that the third quarter has seen a meaningful regression. However, the continuing anemic performance of the general economy and its impact on the metals sector does leave enough room for doubt to give at least some credibility to the notion that 2013 at least feels as if it has no momentum--even if the truth is that it has seen slow but unspectacular progress.