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Steel executives present mixed feelings on future

Keywords: Tags  AMM Comment, John Ambrosia

Cautious is the word that best describes steel executives’ current thinking. The future looks like it will be brighter--after all, business is better than it was just four or five years ago--but there remains a nagging concern that something isn’t quite right.

This spring, AMM conducted a survey on behalf of PricewaterhouseCoopers LLP among global steel executives, similar to surveys conducted in 2011 and 2012. And while 68 percent of respondents said they felt “somewhat” or “very” optimistic about where business is heading, 32 percent said they were “somewhat” or “very” pessimistic, up from just 6 percent two years ago.

What has happened in that time to change those perceptions? After all, for many companies profits have been growing since the Great Recession. The answer seems to be a continuing uncertainty about the U.S. economy, the global financial outlook and the nature of domestic politics. So although many in the metals sector remain upbeat in general, on specific points there is still concern: When will the construction sector pick up? What is the overall future of shale gas development? Where are taxes and regulations going?

We take a look at the meaning of the survey numbers starting on page 14, but here are a few quick conclusions:

>> Executives are getting glummer. In April 2011, 94 percent of executives surveyed were “very” or “somewhat” optimistic about the next 12 months; last year, that number fell to 71 percent. This year it is still a strong number at 68 percent, but it reflects signs of concerns.

>> Recruiting, hiring, retaining and managing employees remain the biggest strategic initiatives or challenges that executives face.

>> Despite occasional news about smaller deals and the possibility of a return to the occasional megadeal, only 14 percent of survey respondents are aggressive in their approach to mergers and acquisitions, essentially unchanged over the past two years.

>> A majority of executives do not see emerging markets--such as Brazil, Russia, India and China--as a path to expansion in the next year. Last year, more than half believed such expansion was likely.

>> Greenhouse gas regulation continues to have little impact on business, perhaps because national legislative efforts have slowed greatly.

>> Information technology strategies are still an important aspect of the metals business. In fact, 86 percent of survey respondents said it is very critical or somewhat important to their operations, up slightly from last year.

As steel executives prepare to make decisions that will shape the next quarter, the next year and even the next decade, perhaps the directions they take will help sharpen those viewpoints.

John Ambrosia
Magazine editor

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