From Dazed and Confused
to Somewhat Enthused

By Tim Triplett, Editor-in-Chief

At this time last year, service center executives were dazed and confused by the depth, breadth and speed of the market’s collapse. Today, many are feeling significantly better about their prospects for 2010.

The findings of MCN’s 2010 Outlook Survey, the subject of this month’s cover story, are surprisingly positive compared to just a year ago. Asked to rank their feelings about the year ahead on a scale from 1 to 6—1 being very pessimistic and 6 very optimistic—three out of four respondents placed themselves on the optimistic half of the scale. Even more notable, more than one-third ranked themselves a 5 or a 6, which suggests they are more than just a little bit bullish about business in the coming months.

This year’s Optimism Index of 4.1, a weighted average of all the survey responses, shows a sharp increase from last year’s 3.5, which was the lowest reading since MCN began publishing its index in 2000. But at 4.1, it’s still well below its peak of 4.8 in 2005. Clearly, the metals market is nowhere near back to normal as we embark on another very challenging year.

The relative health of metals pricing is a key factor lending to the market’s recovery. Steel, aluminum and copper prices all trended up during the course of 2009 as producers cut production to match the weak demand. MCN survey respondents predicted further increases in the price of both ferrous and nonferrous metals averaging 4 to 6 percent in 2010.

Three out of four respondents forecast double-digit increases in sales and profits this year following an industry-wide decline averaging roughly 32 percent in 2009. Such an increase could generate a new wave of hiring as service centers seek to replace at least some of the 18 percent of workers cut from the average staff.

Backing up the service centers’ projections are similar views from their customers. The Institute for Supply Management’s semiannual economic forecast points to positive signs for manufacturing in 2010. Sixty percent of the purchasing and supply executives surveyed by ISM in December expect their revenues to increase this year by a net average of 5.7 percent, following a nearly 11 percent decrease in 2009.

Figures from latest Metals Activity Report also hint that the market may be stabilizing. “Metals shipments are declining more slowly than previously, which suggests a bottoming that goes beyond the normal seasonal shipment slowdown,” reports MSCI.

It seems like such a short time ago that we were searching for the bottom. Now, at least, many of us are looking up.
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Friday, October 20, 2017