Steel Demand Up, Unlikely To Last

Steel demand has skyrocketed both in the U.S. and worldwide, pushing steelmakers to between 70% to 75% capacity, nearly two-thirds busier than at the start of 2008, when operating rates were roughly half that mark, Industry Week reports.

Will this uptick last? CEOs from some of the largest steelmakers in the U.S. aren’t so hopeful. During their 118th annual meeting of the American Iron and Steel Institute in Boca Raton, FL, much of what was expressed was skepticism that the good times will last.

“We are seeing in some sectors a much stronger uptick,” said Dan DiMicco, CEO of Nucor. “Automotive is one, and in the last quarter or so, appliances and the energy sector. We are optimistic, but we are cautiously optimistic.”

“While many sectors of the economy have enjoyed some of the benefits of the government stimulus package, it hasn’t necessarily impacted the steel industry,” said Jim Wainscott, chairman of AK Steel Holding. “Much of those funds went toward spurring infrastructure building, but construction in both residential and commercial building remains sluggish.”

Wainscott also mentioned the “substantially higher costs” domestic producers are facing for imports including scrap steel, coke, metallurgical coal and iron ore.

What about price? According to Nick Sowar, a global steel industry analyst for Deloitte & Touche, “The big concern I see is there are going to be some issues in the fourth quarter. I think there is going to be a breaking point where the prices are too much. Customers may balk at the continual price increases, irrespective of where scrap prices and iron ore are. That’s the challenge.”