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Economy:
More of the Same for 2005
All four quarters of 2005 should see GDP growth of 3.5 percent or
higher, promising another moderately strong year for the U.S. economy,
according to Jeffrey C. Fuhrer, senior vice president and director
of research at the Federal Reserve Bank of Boston.
For
the economy to see another year of respectable 3 to 4 percent growth
“implies a gradual absorption of some excess capacity that
we believe is still in the economy. For that to continue, strong
employment growth is required,” said Fuhrer, who addressed
service center executives at the Metals Service Center Institute’s
Aluminum Division conference in November.
So
far, robust consumption has sustained the recovery, fueled by federal
tax cuts and an increase in after-tax real income. “As tax
cuts fade, we’ll be looking for some other source of income
creation,” Fuhrer said.
One
key factor will be the economy’s ability to add jobs. Net job
growth has been up and down from month to month. “We need more
solid job growth [like the 300,000 jobs added in October] on a sustained
basis to keep growing at 3.5 to 4 percent,” he said.
Prospects
for capital spending in 2005 look good. Durable goods orders, excluding
high tech, have grown at a substantial 12 to 14 percent rate. Tech
orders—for computers, communication equipment and semiconductors—are
growing at a slower rate. “That’s a bit of a risk going
into 2005,” Fuhrer said. “While it had been rebounding
quite nicely, it’s now getting into a pattern of more moderate
growth.”
Another
issue is how much of the recent strength in investment spending
is attributable to the accelerated depreciation tax benefit, which
expires in 2005, he added.
Oil
prices will surely affect spending and inflation in 2005, but not
as much as in the past. Because the United States is so much more
energy efficient, it is not hurt by swings in oil prices to the
same degree. Over the past year, when rising oil prices added $50
billion to the cost of energy for consumers, that diverted just
7/10ths of 1 percent of disposable income. By comparison, the energy
crisis in 1973 cut GDP growth by 2 percent or more, Fuhrer said.
Energy
represents a relatively small share of the cost of production, around
6 percent on average, so it should not have a major impact on inflation
overall next year. Labor costs remain relatively stable, and businesses
reported mixed results in passing along higher prices to consumers.
“We expect inflation to remain moderate. The central bankers
will remain vigilant about it,” Fuhrer said.
While
not predicting what the Fed will do with interest rates, Fuhrer
observed that the financial markets are “moving rapidly toward
neutral, which is some rate of interest that is roughly consistent
with an economy that’s heading toward operating at its full
potential, with full employment. That is viewed to be between 3
and 4 percent for the nominal short-term interest rate. The Federal
Funds rate...may move up 1 point over the next year,” he said.
Paragon
Steel Buys Feralloy Facility
In an effort to better service its Midwest customers, Fort Wayne,
Ind.-based Paragon Steel has purchased the assets of the Feralloy
Midwest Division facility in Butler, Ind.
Built
in 1997, the 85,000-square-foot building leased by Feralloy features
a half-inch by 72-inch-wide Herr Voss cut-to-length line with in-line
primary and precision levelers and a 36-inch by 144-inch Wysong
shear.
In addition, two 35-ton cranes and three drive-through truck bays
service both processing lines. The former Feralloy plant is accessible
via rail and complements Paragon Steel’s nearby 105,000-square-foot
facility, which features two slitters. Both units will process hot-rolled,
hot-rolled pickled and hot-dip galvanized steel.
“We
are excited about this acquisition,” says Thomas C. Barnett,
CEO of Paragon Steel. “It will enable us to better service
our customers. We can now process virtually every product Steel
Dynamics Inc. manufactures in Butler, while maintaining our relationship
with Feralloy.”
Barnett
says customers will receive additional cost savings because material
purchased from SDI can be railed freight-free to both Paragon facilities
for processing.
Founded
in 1994 by Jerome F. Henry Jr., Paragon Steel has grown into one
of the region’s premier processors of flat-rolled steel. The
company maintains an extensive inventory of prime, excess and secondary
steel that, with the acquisition of the Feralloy cut-to-length line
and auxiliary equipment, can be processed and shipped from either
of its two Butler locations.
Paragon
Steel is keeping the Feralloy workforce in place, including support
staff. Feralloy Midwest Division will also maintain a sales presence
at the facility.
Roll
& Hold Expands Operations in Louisiana
ADS Logistics’ Roll & Hold division has added boxcar load
and unload capabilities to its Shreveport, La., facility as the
company expands operations to accommodate additional metal products
and other commodities.
Roll
& Hold’s Shreveport operation opened in September 2003
to handle flat steel blanks on pin pallets for the automotive industry.
In addition to pin pallets, Roll & Hold has expanded its operation
to handle other metals and finished metal parts.
“The
Arkansas, Louisiana and Texas region has a growing number of metals
consuming plants, but it’s a long way from the mills,”
explains Bill Edwards, vice president of Roll & Hold. “Manufacturers
here need an economical alternative to long-distance trucking, which
our rail and container handling facilities in Shreveport provide.”
Roll
& Hold began negotiating with the Union Pacific Railroad in
early 2004 to reopen the building’s closed rail service.
“Roll
& Hold’s space now features an active boxcar dock able
to accommodate lighter-weight coils on skids, auto parts in racks,
and other commodities that can be secured on a flat floor,”
Edwards says. “We will also be able to handle open gondolas
and covered coil cars when the need develops.”
The
Shreveport facility is the company’s third domestic facility
that handles automotive pin pallets; the others are in Marion, Ind.,
and O’Fallon, Mo. Roll & Hold division operates the only
national network of purpose-designed warehouses serving the metals
industry. The division has 12 facilities across the United States.
The company plans to open an international operation early this
year.
Worthington’s
Sales, Earnings Soar
Worthington Industries Inc., Columbus, Ohio, reported record results
for the three and six-month periods ended Nov. 30.
Net
sales for the second quarter of fiscal 2005 were $745.2 million,
an increase of 38 percent from the prior year’s $540.1 million.
Second-quarter net earnings were $47.6 million, compared to $16.9
million for the same period of fiscal 2004.
For
the six months, net sales rose 46 percent to $1.51 billion from
$1.03 billion the previous year. Net earnings were $105.5 million,
compared to $22.8 million a year earlier.
John
McConnell, chairman and CEO, says the core businesses and joint
ventures are running very well.
In
the Processed Steel Products segment, quarterly net sales rose 42
percent, or $133.4 million, to $454.8 million from $321.4 million
in the comparable quarter of fiscal 2004. The increase in net sales
was the result of higher selling prices (up 50 percent). Volumes
were down 6 percent due entirely to the sale of the Decatur cold
rolling assets in August 2004. Excluding the impact of the Decatur
sale, volumes were up 2 percent.
Operating
income improved because of a widening in the spread between selling
prices and material costs.
Briefs
McNichols Co. has relocated its Dallas-area facility to a
new office and warehouse space in Garland, Texas. The branch includes
5,000 square feet of offices and a 37,000-square-foot warehouse.
The staff includes eight people in the warehouse and 10 sales representatives
led by district manager Kevin Pressler. Capabilities of the new
facility include print take-offs, shearing, sawing, cutting and
welding of perforated and expanded metals and other products.
Intermediate
processor Worthington Steel recently signed a long-term sales
contract with North Star BlueScope Steel through December
2008. North Star BlueScope will supply Worthington with about one-third
of the hot-rolled coil it produces each year. BlueScope and Worthington
operate adjacent plants in Delta, Ohio.
In
order to provide metal distributors with faster turnaround time
for standard aluminum extrusions, rod, bar, tube and pipe, Indalex
Aluminum Solutions Group opened a depot in City of Industry,
Calif. Prior to this, the company served distributors from a third-party
warehouse near Los Angeles. Indalex installed a racking system,
new materials handling vehicles and equipment at the West Coast
location. The company also expanded the capacity of its Eastern
depot in Burlington, N.C., as that facility had record-high shipments
in 2004.
Ryerson
Tull Inc. has purchased a B&K leveler from Cooper-Weymouth
Peterson to process non-surface critical material 60 inches
wide with capacities ranging from 0.015 to 0.06-inch-thick material
at its Plymouth, Minn., plant.
[w/foto]
Titan
Steel Corp., Stoney Creek, Ontario, has installed a high-speed
Red Bud Industries slitting line to process up to 30-ton
coils as wide as 72 inches in material thicknesses from 0.015 to
0.250-inch. Curtis Steel, Houston, has purchased a high-speed multi-cut
blanking line from Red Bud.
People
Henning Kornbrekke has been promoted to president and chief
operating officer of Gibraltar Industries, Buffalo, N.Y. He became
president of the company last January, before which he was president
of the company’s Building Products Group. Prior to that, he
was CEO of a division of Rexam Plc.
Feralloy
Corp., Chicago, made several executive appointments recently. Roger
Sippey was promoted to executive vice president and is responsible
for Southern, Charleston and Western Divisions in addition to the
company’s Mexican joint venture, Acero Prime. John Hirt,
vice president-Central, assumed responsibility for Indiana Pickling
& Processing and Oregon Feralloy Partners, in addition to his
existing responsibilities. Armando Figueroa was promoted
to a new position, vice president and general manager-Midwest.
Carl
A. Nelson Jr. was elected to Worthington Industries Inc.’s
board of directors and to the board’s audit committee. He is
an independent business consultant, before which he was a partner
in the Columbus office of Arthur Andersen & Co. for 31 years.
Chicago
Tube and Iron Co., Chicago, has named Michael DiNanno as
vice president-finance and chief financial officer. He also belongs
to the executive committee. DiNanno spent the past 20 years in financial
positions at Motorola Inc.
Daniel
Kendall has been elected president of ABC Metals Inc., Elmhurst,
Ill. A 22-year veteran of the company, he most recently served as
executive vice president and chief operating officer. Patrick
Pohl was named executive vice president and Scott Dunderman
was named vice president of Texas operations. Pohl joined ABC Metals
in 2003 as vice president of purchasing. Before that, he was materials
manager at an ABC affiliated company, Small Parts Inc. Dunderman
has been with the company 25 years, serving in operations, sales
and general management. He was named general manager of the El Paso
branch when it was opened in October 2002.
Dave
Conrad has been named sales manager for Chicago at Lapham-Hickey
Steel Corp. Conrad started with the company 17 years ago and worked
his way through positions in inside sales, purchasing and outside
sales.
Richard
Petty has joined Heyco Metals Inc., Reading, Pa., as a sales
agent for the Southeastern United States. Petty has held sales positions
with New England Metal Co., VDN America, Criterion Metals, and Scott
Brass.
Dan
Gillen has joined Marmon/Keystone Corp. as an account manager
at the New Castle, Del., branch, serving accounts in northern Pennsylvania
and New Jersey. He has more than 20 years of metals distribution
sales and management experience. Matthew Kapusta joined the
Delaware branch as an inside salesman. He has several years of experience
in steel distribution. Tim Leahy joined the company as an
account manager at the company’s Auburn, Wash., branch. He
has more than 20 years of steel sales and product management experience.
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