It's not at full blast, but Big Steel looks rosier
Is the US steel industry on the way out of its depression, a slump that has put more than a third of American steelworkers out of work? ''Yes. Yes. Absolutely yes. Totally yes,'' exclaims Robert Nickels, director of ferrous metals research at Chase Econometrics, a forecasting firm.Skip to next paragraph
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Mr. Nickels is not the only one acquainted with the industry to answer that question in the affirmative. Analysts, economists, and steel executives agree that a recent pickup in shipments is boosting the steel industry out of the $3 billion trough of steel losses last year.
But not everyone is as excited as Mr. Nickels. ''I don't feel quite the euphoria that some have expressed over recovery,'' E.Bradley Jones, chairman of Republic Steel Corporation, said in an interview. ''There's been an obvious improvement, but from here on the (steel) recovery will be gradual.''
And when the industry does get back on its feet, the recovery is expected to be seen in higher profits, rather than many more rehired steelworkers. Steel companies will be more efficient, smaller, and more specialized, and will employ a lot fewer people.
''These buzzwords are probably correct,'' agrees Robert Crandall, senior fellow in the economics study program at the Brookings Institution in Washington. ''All of those people (laid off) aren't going to be hired back.''
Although no one can say exactly what the industry will look like once it reaches the end of the recovery road, at least it has started to move along it.
For instance, in December the industry was operating at a ''shade below 30 percent of capacity, the worst since the (Great) Depression,'' says Sheldon Wesson at the American Iron and Steel Institute. ''But last week it was back to 54 percent. Now no one is shooting off rockets and dancing in the streets over 54 percent,'' he declares, but the figure is ''a sign of strength.'' The industry needs to operate at least at 65 percent of capacity before some profits can be made, Mr. Wesson adds.
Another hopeful indicator is steel shipments. Last year, shipments averaged a little over 5 million tons a month, and in December went down to just over 4 million a month, according to George McManus, steel editor of Iron Age magazine in Pittsburgh. In March, ''we're now up to about 6 million and are expected to stay there through about the second quarter,'' he says. ''The normal would be about 8 million in a reasonable (economy).''
One more encouraging factor is a strong reduction in imports. The October agreement of the European Common Market to limit its steel exports to the United States was a victory for American steelmakers. Japanese exports to the US ''are very much lower'' (partly because of political pressure, partly because of worldwide recession), according to Charles Bradford, a steel analyst at Merrill Lynch & Co. Though imports are down, he expects them to pick up in the second half of this year.
On the labor front, ''more than 30,000 workers have been recalled over a 10 -week period,'' Mr. Wesson says. ''But there is no cause for joy in 'only' 130, 000 laid off. That's a lot of people.''
One reason for the increased activity in shipments and orders is higher production of autos and appliances, analysts say.