Increasing steel prices and higher output will result in moderate revenue growth
Los Angeles, CA (PRWEB) November 16, 2012
The global economic crisis resulted in a dramatic reduction in demand for steel. According to IBISWorld industry analyst Agiimaa Kruchkin, “when the activity from construction and manufacturing markets took a steep fall, sales in the Iron and Steel Manufacturing industry also contracted.” After revenue plummeted 50.1% in 2009, major participants faced poor market conditions. Revenue rebounded in 2010 and 2011, however, as the economy improved, albeit slowly, and demand for automobiles revived. While demand from developed economies remain relatively weak, causing the price of steel to slightly decline over 2012, revenue is anticipated to remain stable with a marginal growth of 0.1% to $111.3 billion in 2012.
Despite strong growth in 2010 and 2011, the industry's revenue is anticipated to average a mere annual increase of 0.2%. In 2009, downstream US demand from automobile manufacturing and commercial construction plunged 36.5% and 29.7%, respectively, while steel prices dropped 25.1% in response to declining global demand. During 2010 and 2011, prices recovered strongly as demand from the Iron and Steel Manufacturing industry's major markets bounced back, but not enough to compensate for steep declines during the recession. And, “because near-term economic growth in Europe and the United States remains uncertain, steel prices are expected to drop 2.9% in 2012,” says Kruchkin.
Also during the five-year period, production has fallen at an average annual rate of 1.7% due to recessionary efforts to reduce costs through scrap steel recycling. When the recession hit and demand fell, manufacturers slashed production levels to preserve profit margins. Low profitability has led to increased market share concentration, as multiple smaller firms either exited or were acquired by larger companies during the economic crisis. US steel, for example, acquired Lone Star Technologies in 2007, marking a deal that made US Steel the largest tubular goods producer in North America.
Output has recovered markedly since the recession, but increased international competition and rising input costs are expected to force more companies out of the industry. This trend, combined with frequent merger and acquisition activity, will cause the industry’s market share concentration to increase. Nonetheless, over the five years to 2017, fluctuating but generally increasing steel prices and higher output will cause revenue to grow at a healthy pace. This growth will be a substantial improvement from the past five years, but will ultimately be minimal compared with the iron and steel industries of competing leading nations. For more information, visit IBISWorld’s Iron & Steel Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures pig iron, steel and ferroalloys. Pig iron may be manufactured in a blast furnace or via newer direct reduction methods. Steel may be manufactured in basic oxygen furnaces (newly made steel) or in electric arc furnaces (recycled steel). The industry also includes firms that manufacture basic steel shapes (e.g. bars, plates, rods, sheets, strips and wire) or form pipes and tubes from steel they have produced themselves.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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