Despite a definite chill in the air late last week in West
Central Florida, veteran steel analyst Charles Bradfords
outlook for this years steel industry was generally sunny
during the 25th annual Tampa Steel Conference held Feb. 6-7 in
presentation is optimistic," Bradford, principal of New
York-based Metals Industry Advisory Group LLC, told some 250
attendees at the event.
"But there is a Black
Swan to worry about," he said, referring to the
unknownand usually negativefactor that analysts
fail to account for in their forecasts.
Much of the optimism
referenced by Bradford is rooted in a long-awaited rebound in
nonresidential construction. "Thats what has been
lagging. But it should have lagged. ... It has always lagged
housing by two years," Bradford said.
"(This year), we
think, is going to be the year when nonresidential construction
starts to pick up. ... Realistically, thats the largest
market for steel. It accounts for some 40 percent of domestic
steel consumption," he said.
"I think we are going
to see 3- or 4-percent growth in steel shipments," Bradford
forecast. "I believe 2014 is the year of turnaround for steel.
Thats when nonresidential construction comes back. We
think 2014 is going to be a good year. Theres no reason
2015 is not going to be better."
that the automotive industry looks a "little shaky at the
moment," given high inventories, he said "that (shakiness) can
disappear very quickly. A couple of good sunny days and people
will go out and buy cars again, especially given all the
accidents and damage done during the winter. ... We are going
to need a lot of replacement cars."
Focusing in on one of
the hottest topics on the steel circuitDearborn,
Mich.-based Ford Motor Co.s shift to aluminum in key
components of its best-selling F-150 pickupBradford
described the development as a major breakthrough, but moved on
to what he considers a greater threat to steelmakers
"The steel industry
has its own competitive product called advanced high-strength
steel. ... It accomplishes the same thing as aluminum at lower
cost," he said.
"If this product is
successfuland we have every reason to believe that it can
be if they market it halfway wellit means 20-percent less
steel in a car. They have to reduce the weight of the car 20
percent to meet mileage requirements," Bradford said.
"Will the steel
industry be able to raise their prices to offset that 20
percent?" he asked. "They never have in the past. ... For
selling a better product, you should get a better price.
Thats the real solution."
And the Black Swan?
There are more than a few possibilities to pick from, although
by its very nature the Black Swan is an unknown. Candidates
range from higher interest rates, Bradford said, to developing
country currency collapse, another bank crisis and the impact
of lower raw material costs on steel company survivability.