Steel and other metals suppliers are returning from their Labor Day holiday to a murky pricing outlook that may be further undermined by their customers' plant closures and other cutbacks.
Economic news in August was dominated by the intensifying trade war between the United States and China and the inverted yield curve in the US bond market. The macro jitters are one reason that a rebound in steel prices stalled, as evidenced by Fastmarkets' steel hot-rolled coil index, fob mill US, which was stuck in a range of $29-30 per hundredweight ($580-600 per ton) in the second half of the month.
While the broader US economy is still growing, the manufacturing sector is probably already in a recession, according to Chad Moutray, chief economist for the National Association of Manufacturers.
"Businesses in the US have become more hesitant in their spending," Moutray said in a Q&A on the association's website. "Within the manufacturing industry, production is contracting both in the US and abroad, and hiring has slowed in the sector," Moutray said.
A Fastmarkets survey of Worker Adjustment and Retraining Notification (WARN) notices and other company layoff announcements reinforces the worry that mills and distributors may face challenges in maintaining volumes and pricing. Aside from the well-recognized lower volumes among big automakers and belt-tightening in the oil-and-gas sector, metals businesses are being hit hard as WARN notices signal reticence in end-use segments including:
- Venchurs, a provider of packaging kits and racks for auto components and power trains, in September is closing a facility in Michigan that employs 152 people.
- Mitchel Group, which machines auto parts from bar stock, will close two plants, in Indiana and Tennessee, and terminate all 143 employees there in October.
- Fisher Auto Parts will close an Ohio plant in October, with the loss of 137 jobs.
- Gearbox provider Merit Gear will shutter a Wisconsin plant and terminate 70 employees by the first quarter of 2020.
- FreightCar America will cut 200 jobs as it closes a plant in Virginia in late September.
Industrial machinery and tools
- Another railcar maker, ACF Industries, said it will lay off 63 people at its Pennsylvania location in October.
- Tube bending equipment provider Addition Manufacturing Technologies was scheduled to close a plant in Ohio, with the loss of 119 jobs, effective August 30.
- Timken Drives confirmed to Fastmarkets on August 29 that it was laying off 63 people in Illinois, effective Tuesday September 3.
- Cleveland Hardware & Forging is closing an Ohio facility in September, with the loss of 25 positions.
- Stanley Black & Decker will close an Ohio plant in October, with a reduction of 91 jobs.
- Kennametal has announced a closure and loss of 60 jobs in Pennsylvania, with the wind-down there beginning in October.
- Electrical enclosures foundry Burndy will lay off 54 people in Connecticut by the end of the year as a result of production being shifted to Alabama.
- Metal can producer Silgan Containers is laying off 87 people in October in California and will close a plant in Wisconsin, with the loss of 70 jobs by November.
- Tramontina USA Cookware, a producer of metal pots, pans and utensils, is closing a Wisconsin plant and letting go 145 workers between now and the end of the year.
- Goodman Manufacturing, a producer of heating, ventilating and air conditioning systems, is cutting 703 positions at a Tennessee plant, effective Friday September 27.
Serving almost all of those industries - and cutting 232 jobs this year beginning in July - is Sivyer Steel Castings in Iowa. That location includes electric-arc furnaces with annual capacity of 40,000 gross tons, according to the company's website. The company also makes armor for the US and Israeli militaries and security bollards.
- United Structures of America is closing a Texas steel-buildings plant in September, at a loss of 73 jobs, and another in Tennessee, subtracting 45 workers, in September.
Some US downstream business have been hurt by Section 232 tariffs that have been placed on their raw materials but not on competing foreign finished goods.
Even the metals industries' upstream suppliers are trimming costs and reducing production, as evidenced by WARN notices. Refractories maker HarbisonWalker is cutting 87 workers in Missouri in October. Akers National Roll said 47 employees will lose their jobs in a Pennsylvania closure this month. Metal coater Alliance Industries is cutting 22 jobs in Wisconsin beginning this week.
Although mills are idling some capacity and trimming their workforces in the steelmaking, energy-tubular and tinplate businesses, mostly they have been reluctant to let a large number of employees go. As the US labor market tightened in 2017-19, mills learned how challenging it can be to find employees with the necessary skills and willingness.
"The mills do not want to lay off their employees," a southern steel pipe distributor said. "They spent the last three years training them and getting them up to speed, so for now they seem to want to wait, hoping to see things getting better."
Moutray said American industry needs policy certainty, including the ratification of the United States-Mexico-Canada Agreement, re-authorization of the Export-Import Bank of the United States and a trade truce with China.
"Manufacturers remain optimistic about the future, but in order to keep growing, we need to address the workforce crisis and resolve trade uncertainties," Moutray said.