Los Angeles, CA (PRWEB) January 30, 2013
The global economic crisis resulted in a dramatic reduction in demand for steel. When activity in construction and manufacturing markets (the primary markets for steel products) took a steep fall, sales for the Iron and Steel Manufacturing industry also contracted, says IBISWorld industry analyst Agiimaa Kruchkin. However, after revenue plummeted 50.1% in 2009, it quickly rebounded in 2010 and 2011. As the economy slowly improved, demand for automobiles, which are largely composed of steel inputs, revived and bolstered industry demand. Though continued weakness in developed nations caused brief dip in 2012, revenue is anticipated to recover 5.9% to $119.8 billion in 2013 on the back of rebounding steel prices. Despite remarkable growth in 2010 and 2011, the industry's five-year revenue performance is offset by the steep declines of 2009, averaging an annual decrease of 2.5% over the five years to 2013. 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 industry's major markets bounced back. However, because near-term economic growth in Europe and the United States remained uncertain, steel prices dropped again in 2012, hurting revenue. As the economy begins showing sustained signs of improvement in 2013, steel prices are set to climb again.
Production also fell during the past five years 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. Output recovered markedly in 2010 and 2011, however, and is expected to continue rising through 2012 and 2013, says Kruchkin. The Iron and Steel Manufacturing industry is moderately concentrated. The four largest players are ArcelorMittal, The Nucor Corporation, United States Steel Corporation and AK Steel Holding Corporation. Over the past decade, concentration has increased due to industry restructuring and merger activity, which occurred heavily in the early part of the decade. In addition, 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. Consolidation, and therefore industry concentration, is expected to continue an upward trend in the next five years. This results from increasing global competition for domestic customers, as well as rising input costs. Consolidation has been the solution for many firms because larger and more diversified operations can reduce costs through economies of scale and mitigate the risk of negative product or market segment conditions.
Increased international competition will characterize the next five years for the industry. This trend, combined with frequent merger and acquisition activity, will likely reduce the number of enterprises operating in the United States even further, though not as rapidly as the past five years. Over the five years to 2018, fluctuating but generally increasing steel prices and higher output will drive revenue to grow. This growth will be minimal, however, 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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