NAM Forecasts Sluggish Growth,
Supports Economic Stimulus
The U.S. economy should avert a recession, but will experience a significant deceleration in GDP growth through the first half of this year due to surging energy prices and a dip in corporate profits that will hold down business spending, according to the 2008 Economic Forecast from the National Association of Manufacturers in Washington, D.C., released Jan. 23

David Huether, NAM’s chief economist and the report’s author, sees GDP growing by just 1.4 percent in the first half. “The ripple effect of the housing downturn and a slowdown in motor vehicle production has caused a significant hit to the manufacturing economy,” Huether says. Overall, manufacturing output edged up by just 1.8 percent in 2007—its slowest pace in four years—and is expected to continue at 1.9 percent in 2008.

According to the U.S. Commerce Department’s advanced report on GDP released Jan. 30, the nation’s economy rose at an annual rate of only 0.6 percent in the fourth quarter of 2007, meaning the economy rose by only 2.2 percent over the course of the year, the slowest pace in five years.

“The deceleration of GDP growth last quarter was mainly due to the ongoing housing recession,” Huether says. “Fortunately, continued growth in business investment and an improving trade balance together offered a positive counterweight to the downturn in housing, adding as much to GDP growth as residential investment took away.”

Adjusted for inflation, U.S. exports grew by 7.9 percent last year, which Huether says is almost four times the 2 percent rate of growth of imports.

“Excluding imports of petroleum products, which now constitute a majority of our country’s trade imbalance, the U.S. trade deficit stood at just 2.3 percent of GDP in the fourth quarter. That is the lowest level since 1999 and a 40 percent improvement in just the past three years.”

The Feb. 1 employment report from the U.S. Department of Labor underscores the need for quick action on the stimulus package now before Congress, Huether says.

“Following 52 consecutive monthly increases, the economy failed to create jobs in January for the first time since August 2003,” he says. “Overall, non-farm employment fell by 17,000 last month, with a 55,000 decline in construction and manufacturing employment more than offsetting a tepid 34,000 employment increase in the service sector.

“While production employment in manufacturing edged down by just 2,000 last month, over the past year jobs on the factory floor have dropped by 106,000,” Huether says. “With 93 percent of these job losses in either the motor vehicles sector or in industries closely connected with housing, it is clear that the sharp decline in residential investment, as well as slowing consumer demand for autos, is having a significant negative impact on the manufacturing sector.

“The fact that service sector employment gains also have been on a downward trajectory over the past year is a clear signal that the housing downturn is having negative spillover effects, not only on the manufacturing sector, but on the rest of the economy,” Huether says. 

As insurance against a general recession, NAM is among those urging Congress and the administration to inject a short-term stimulus package into the economy. “Coupled with continued growth from exports, continued growth in both consumer spending and business investment will be needed to keep the overall economy out of recession this year,” Huether says.

Commerce Puts Duties on ‘Dumped’ Chinese Pipe
The U.S. Department of Commerce issued a preliminary finding last month that Chinese producers of circular welded pipe are dumping below-cost product in the United States.

The Commerce Department will impose antidumping duties on China pipe exports at an average rate of 25.67 percent. Individual company margins range from zero to 51.34 percent. These antidumping duties are in addition to the antisubsidy duties imposed by the Commerce Department on Nov. 6, 2007, when it was determined that the government of China was illegally subsidizing Chinese pipe makers. Circular welded steel pipe products, known as standard and structural pipe, are used in plumbing applications, HVAC systems, sprinkler systems, fencing and construction.

Pipe imports subject to the petition against China surged from 10,000 tons in 2002 to more than 750,000 tons in 2007. The surge reportedly caused the loss of 500 American jobs, approximately 25 percent of the total workforce employed in this segment of the domestic pipe industry.

The trade suit, filed in parallel with the International Trade Commission and the Department of Commerce on June 7, 2007, was brought by the Ad Hoc Coalition for Fair Pipe Imports from China and the United Steelworkers. The Ad Hoc Coalition includes Allied Tube & Conduit, IPSCO Tubulars Inc., Northwest Pipe Co., Sharon Tube Co., Western Tube & Conduit Corp. and Wheatland Tube Co. On July 20, 2007, the ITC made a finding that circular welded pipe from China is causing material injury to the U.S. industry.

After the Department of Commerce makes final determinations in both the antisubsidy duty and antidumping duty investigations, the U.S. International Trade Commission is scheduled to complete its final investigation in the spring of 2008.

MSCI
Steel Inventories Rise; Liquidation at an End?
Steel inventories at service centers in the United States and Canada closed 2007 up slightly from November levels as year-over-year shipments in both countries fell 4.1 percent from those of December 2006, according to the latest Metals Activity Report from the Metals Service Center Institute, Rolling Meadows, Ill.

U.S. steel inventories at the end of the year were up 1 percent, to 12.26 million tons, from November’s month-end supply. Canadian inventories rose 1.6 percent from November’s total to 1.15 million tons. Aluminum shipments in both countries fell from year-ago levels, while total inventories rose slightly from those reported in November.

Although shipments were below year-ago levels again in December, it appears that the liquidation phase of the inventory cycle may have come to end. Service center inventories of steel and aluminum in the United States and Canada all increased in December. For the U.S. steel segment, this is the first increase since the October 2006 inventory peak of 16.8 million tons.

Steel product activity
December shipments of steel products from U.S. service centers totaled 3.34 million tons, down 4.1 percent. For the full year, U.S. steel shipments were 52.18 million tons, 6.8 percent below 2006 steel shipments. The year-end steel inventory figure was 25.7 percent lower than inventories at the end of 2006. At December shipping rates, the year-end total inventory was equal to a 3.7-month supply.

In Canada, steel product shipments from metals service centers totaled 226,200 tons in December, down 4.1 percent. Full-year 2007 steel shipments of 3.7 million tons declined 6.7 percent from 2006 steel shipments. The year-end inventory was 8.6 percent lower than inventories at the end of 2006 and, at December shipping rates, represented a 5.1-month supply.

Aluminum product activity
December shipments of aluminum products from U.S. service centers totaled 75,100 tons, or 13.4 percent less than December 2006 shipments. Full-year 2007 shipments fell 5.8 percent to 1.15 million tons. U.S. year-end aluminum inventories of 274,700 tons were down 27.1 percent from inventories at the end of 2006 and at December shipping rates represented a 3.7-month supply.

Canadian aluminum shipments fell 13.9 percent in December to 7,300 tons. Full-year 2007 aluminum shipments of 119,800 tons declined 3.9 percent from 2006 shipments. Inventories of 28,400 tons were down 3.4 percent from December 2006 and, at December shipping rates, represented a 3.9-month supply.

AISI
China is Top Offshore
Supplier of Finished Steel
Based on preliminary Census Bureau data, the American Iron and Steel Institute, Washington, D.C., reports that the United States imported a total of 1,977,000 net tons of steel in December 2007, including 1,583,000 tons of finished steel. While full-year 2007 total and finished steel imports declined by 27 percent and 26 percent, respectively, vs. the previous year’s all-time record, they were up 4 percent and 5 percent vs. 2005.

The three largest suppliers of finished steel from offshore in 2007 were China, South Korea and Japan. While steel imports from China, at 4,595,000 net tons, declined modestly in 2007 vs. 2006, they were double China’s 2005 imports. Imports of line pipe and OCTG from China each rose by 20 percent last year.

“Steel imports for the full year 2007 ended up relatively high, notwithstanding the decline from the 2006 record and the decelerating overall import levels seen in the second half of the year,” says Andrew G. Sharkey III, AISI president and CEO. “China, a non-market economy, remains the largest steel exporting nation in the world. Trade and market-distorting practices are still pervasive in the global steel sector. Less efficient steel producers in China and elsewhere continue to benefit from large-scale subsidies and other artificial competitive advantages. Under these conditions, AISI will closely monitor the steel import situation in 2008, and domestic steel producers will stay vigilant about dumped or subsidized imports.”

In other action, AISI reports that for the month of November 2007, U.S. steel mills shipped 8,683,000 net tons, an 8.7 percent increase from the 7,991,000 net tons shipped in November 2006 and a 6.0 percent decrease from the 9,238,000 tons shipped in the previous month.

A year-to-year comparison of year-to-date shipments shows the following changes within major market classifications: service centers and distributors, down 9.4 percent; automotive, up 0.5 percent; construction and contractors’ products, down 3.0 percent; and oil and gas, down 9.2 percent.

IISI
World Steel Output Up by 7.5% in 2007
World crude steel output topped 1.34 billion metric tons for the year 2007, a 7.5 percent increase over 2006, reports the International Iron and Steel Institute, Brussels, Belgium. The total represents the highest level of crude steel output in history, while 2007 was the fifth consecutive year that world crude steel production grew by more than 7 percent.

While the overall output remains high, 2007 saw a small slowdown in the growth rate, which peaked at the end of the first quarter. This slowdown in growth was seen in nearly all the major producing countries and regions including China, the European Union, Eastern Europe and the United States. The exception was in the Middle East, where production growth accelerated during the second half of the year.

China’s steel production in 2007 reached 489 million metric tons, a 15.7 percent increase vs. 2006. This represents a growth reduction from the 18.8 percent pace achieved in 2006, 26.8 percent in 2005 and 26.1 percent in 2004. However, China remains the driving force behind the still-strong world production figures. Without China, world crude steel production would have only grown by 3.3 percent.

In the United States, steel production experienced negative growth in the first three quarters but showed a turnaround in the fourth quarter with three consecutive months of growth. Total U.S. crude steel production was 97.2 million metric tons, a 1.4 percent reduction vs. 2006.

CBSA
2007 Service Center Shipments Down 5.5%
Service center shipments of copper and brass products declined nearly 5.5 percent in 2007, capped off by a disappointing December, reports the Copper and Brass Servicenter Association, Wayne, Pa.

Copper shipments for the full year rose by 0.5 percent from 2006 totals, but alloy shipments declined by 9.2 percent.

December shipments declined over 21 percent from November, while the average daily shipping rate was down over 17 percent. CBSA officials attribute the weakness to service center shutdowns in the last two weeks of the month.

Briefs
Economic activity in the manufacturing sector expanded in January, while the overall economy grew for the 75th consecutive month, according to the January ISM Report On Business. “The manufacturing sector gained momentum in January as the PMI rose 2.3 percentage points, signaling stronger performance in January when compared to the seasonally adjusted 48.4 percent recorded in December,” says Norbert J. Ore, chair of the Institute for Supply Management’s Manufacturing Business Survey Committee. “This represents a return to the recent trend of slow growth in manufacturing, as the PMI has averaged 50.2 percent for the past six months. The PMI was driven by the Production Index, which made a rebound of 6.6 percentage points during the month, while the New Orders Index reflected a slight decline at 49.5 percent.”

The Association of Steel Distributors, Chicago, named Cam Smith Sr., founder and chief executive officer of Doral Steel Inc. in Toledo, Ohio, as the recipient of its highest honor, the Steel Man of the Year Award. This annual ASD award honors one individual who embodies leadership, dedication, service and excellence in the steel industry. Smith will be officially recognized and receive his award at a black-tie event at ASD’s annual convention April 5 at the Marco Island Resort in Marco Island, Fla.

According to the January 2008 Precision Metalforming Association Business Conditions Report, metalforming companies expect business conditions to remain steady over the next three months despite low current shipping levels. Conducted monthly, the report is an economic indicator for manufacturing, sampling 159 metalforming companies in the United States and Canada. When asked what they expect the trend in general economic activity to be over the next three months, 20 percent of participants reported that conditions will improve, 50 percent anticipate activity will remain the same, and just 30 percent expect a decline in business conditions. These same percentages were reported in December 2007.

The Metals Service Center Institute’s regional chapters awarded 117 college scholarships in 2007, more than double the number awarded in 2006. When combined with matching sums provided by the MSCI national organization, the awards totaled more than $198,000.