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Look Back at 2014 Reveals Themes in the Year Ahead

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Last year started out with one of the worst winters in history across much of the country, which hobbled the economy well into the second quarter. Despite that frosty start, 2014 turned out to be a good year for the metals industry. What’s ahead in 2015? A review of headlines in Metal Center News for the past 12 months reveals some clear themes.

The most-talked-about markets this year were automotive, energy and construction. Automakers in North America expect to produce over 17 million vehicles in 2015, reaching prerecession levels. New oil and gas exploration in shale plays across the nation fueled demand for steel pipe and tube, and a host of other products. Annual housing starts are averaging over a million units again, and nonresidential construction is finally starting to pick up, as well.

Much of MCN’s reporting in 2014 focused on the tug-of-war between the steel and aluminum industries for a larger share of the automotive market. The aluminum industry forecasts that demand for aluminum sheet will grow at a 30 percent rate as carmakers seek to lighten vehicles and improve fuel efficiency. Aluminum producers are clearly setting themselves up for an assault on automotive steel applications, judging by their many mergers, expansions and capital investments.

The steel industry is hardly conceding any ground to aluminum. Just as many headlines heralded new developments in lightweight advanced high-strength steels. Steelmakers claim the auto industry can meet the government mileage standards by using the new steel alloys, in combination with power train innovations, and at a lower cost than switching parts to aluminum.

Reflecting the healthier economy and companies’ efforts to position themselves for the future were several major mergers in 2014. On the mill side, Severstal sold its two U.S. mills to Steel Dynamics and AK Steel. ThyssenKrupp sold its Alabama mill to a joint venture between ArcelorMittal and Nippon Steel. Nucor acquired Gallatin Steel’s Kentucky mill. Similar deal making occurred in the aluminum market, where Aleris acquired Nichols Aluminum. Makers of steel and aluminum apparently anticipate improving demand in a growing economy. Somewhat unusual in 2014, there were no major mergers among service centers.

While the U.S. economy has finally rebounded, the rest of the world continues to struggle. The relative prosperity has made North America a target for low-priced imports. Domestic producers have responded with a host of trade cases on products ranging from OCTG to rebar. Favorable rulings by government regulators promise some relief from the unfair trade next year.

The big unknown for 2015 is what will happen to steel and aluminum prices. Will demand expand enough to absorb all the imports at reasonable market prices? The answer to that question is in tomorrow’s headline.

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