April 5, 2015 / agility, customer delivery, industry news, material costs, strategic planning
Like most sectors of the metal-cutting industry, metal service centers are hoping that experts are right about the growth prospects for 2015. After 2014 fell short of expectations and with recent data showing less than favorable numbers, most companies are trying to stay optimistic about the months ahead.
The latest figures from the American Iron and Steel Institute show that February steel shipments from U.S. steel mills were down 10.8 percent compared to January 2015 and decreased by 9.1 percent compared to February 2014. Shipments year-to-date were down 5.3 percent compared to 2014 shipments.
According to data from the Metal Service Center Institute (MSCI), U.S. service center steel shipments declined in the first three months of 2015 compared to the same months in 2014, although March shipments were only down by a tenth of a percent. Shipments of aluminum products, on the other hand, increased in both February and March after being down in January. Meanwhile, steel and aluminum inventories grew in the first three months of 2015, MSCI reports.
Even with a rough start to the year, analysts remain optimistic that there will be growth in 2015. As we reported in our 2015 Industrial Metal Cutting Outlook, forecasts for steel demand are positive, but growth rates will not be as strong as they were in 2014. According to the Short Range Outlook 2014-2015 from the World Steel Association (worldsteel), U.S. steel demand is expected to increase by 1.9% in 2015—much lower than the 6% growth the U.S. experienced in 2014. Globally, worldsteel forecasts that global apparent steel use will increase by 2.0% this year.
Many industry leaders are also fairly optimistic about this year. In a mid-February statement announcing its 2014 financial results, Reliance Steel & Aluminum Co. said that it expects the U.S. economy to continue to improve throughout 2015. The Los Angeles, CA-based service center believes high levels of metal being imported into the U.S. will continue given the strong U.S. dollar and weaker economies in other parts of the world, which will continue to put downward pressure on steel prices. In addition, due to normal seasonal trends and an improving demand environment, Reliance expects higher tons sold in the first quarter of 2015 versus the fourth quarter of 2014, but lower average selling prices and margins.
Of course, no one really knows how this year is going to shake out. Perhaps the greatest gauge for how metal service centers might fare in 2015 is to look at segment forecasts. Below are outlooks for three OEM categories that will likely play a large role in determining demand in 2015:
- Automotive. In 2014, the automotive industry registered gains it hasn’t seen since 2006, and growth is expected to continue in 2015. According to an April 1 from manufacturing.net, auto sales are on track to reach 17 million this year, their best performance since 2005. Low interest rates, low gas prices, the improving economy, and new models will all drive growth, the report says. In addition, the material war between steel and aluminum will likely continue in 2015 as automotive companies seek ways to meet federal emission standards.
- Non-residential construction. Metal Center News recently reported that non-residential construction—one of the steel industry’s biggest markets—is expected to finally register some growth in 2015. While this market has been slow to respond to the improving economy, the report states that the American Institute of Architects predicts an 8.1% increase in non-residential construction this year, driven by double-digit increases in commercial construction. Healthy gains are also expected in institutional projects such as schools and health care facilities. You can download the full Metal Center News forecast report here.
- Energy. The energy sector will likely receive the most attention in 2015. While steel demand from energy companies has been growing at a fast pace, some experts believe the sector’s steel demand could be subdued in 2015. “Globally, higher crude oil prices drove a lot of energy companies to invest in shale formations,” states one analysis from Market Realist. “However, lower crude oil prices dampened the mood among energy exploration companies.” Low oil prices may also have larger effects on the industry, including decreased steel prices and increased U.S. steel imports. To read more about the impact crude oil pricing may have on the steel industry, check out Modern Metals February cover story, “Brooding Over Crude.”