Competition from imports and substitute products will hamper industry growth
Los Angeles, CA (PRWEB) March 22, 2013
The Steel Rolling and Drawing industry is expected to continue recovering in 2013 after suffering major blows from the global economic downturn. In late 2008 through to 2009, declines in demand for automobiles and commercial construction caused these downstream markets to make severe cutbacks in their purchases of rolled and drawn steel. In 2010, however, demand for the industry quickly rebounded in line with renewed production in downstream markets. According to IBISWorld industry analyst Kevin Boyland, “These changes in downstream demand levels offset one another, and the industry has experienced moderate growth since.” In the five years to 2013, industry revenue is expected to increase at an annualized rate of 1.3% to $15.5 billion. As downstream demand continues to strengthen through 2013, revenue is projected to grow about 1.6%.
In 2009, major fluctuations in the economy resulted in varying levels of demand for cold-rolled and drawn steel products. The automobile manufacturing market endured an especially difficult period as consumer spending plummeted. Meanwhile, demand for new construction became almost nonexistent following the housing bubble burst. Lowered demand from these downstream markets lead to bleak industry performance for the year. Competition from imports has also intensified in recent years. Rolled and drawn steel products from countries where companies enjoy lower operational costs, such as China, have posed a competitive threat to the industry. “The depreciation of the US dollar during the economic downturn allowed for cheaper US-made goods in the global market,” Boyland says. While this somewhat mitigated the threat of imports during the recession, this form of competition has not gone away. As the economy slowly recovers and the dollar appreciates, participants in the Steel Rolling and Drawing industry will increasingly contend with rising import penetration.
The Steel Rolling and Drawing industry is moderately concentrated, with the four largest companies accounting for about 52.1% of total revenue in 2013. Takeover and merger activity has contributed to an increase in concentration in recent years. For many firms, this has been the solution to rising input costs because larger and more diversified operations can spread these costs onto more products through economies of scale. Furthermore, many firms have exited the industry by vertically merging with integrated steel mills, enabling them to source steel inputs from in-house, which reduces costs and improves margins. After recent acquisitions and exits, the industry’s major players are currently Metals USA Inc., Allegheny Technologies Incorporated, Worthington Industries Inc. and California Steel Industries Inc. Consolidation is expected to increase throughout the next five years as more firms experience international competition for domestic customers.
As demand from downstream industries recovers, revenue is projected to grow during the five years to 2018. Intensified global competition and weakening demand for domestically produced steel will ultimately moderate this growth. Additionally, competition from substitute products will continue to increase as automobile manufacturers, in particular, use lightweight materials, such as aluminum, in response to consumer demand for more fuel-efficient vehicles. These efforts will cut into demand from one of the industry's key downstream markets. For more information, visit IBISWorld’s Steel Rolling and Drawing in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in this industry roll or draw purchased steel, which may be sourced from local steel makers or imported. Firms produce a variety of shapes through the rolling process, while the only drawn product is wire of various grades and gauges. Typically, the end product is made to conform to customer specifications. The industry does not include firms that roll or draw steel that they manufactured 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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