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Link to January 2008 .pdf |
Newsletter / January 2008 |
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2008 Forecast
By Jim Stavis
It is with great trepidation that we venture forth into the New Year. This statement sounds far worse than it probably is, but there are many causes for concern in the coming year. I have always tried to look on the bright side - that the glass is actually half full. But these days you don't have to look very far to see storm clouds on the horizon. The major theme of the Metals Service Center Institute's economic summit held last September was, "it could be worse." Now how's that for some good news?
First, let's discuss the bad news and it is nothing you haven't heard before. It is hopeful that the decline in housing and the mortgage meltdown will not suck the economy down with it. Hopefully, the president's actions will prevent this from happening. Clearly, the credit crunch has stalled many projects and created concern in the minds of American consumers. Secondly, the cost of energy is another sobering reality that affects the pocketbook and psyche of consumers. People are traveling less and have less disposable income to spend. This translates to a shrinking economy in spite of the efforts being made with our monetary policies. Consumer confidence, once an indicator of great strength, has continued to decline each month. It is hopeful that these events will not create the dreaded R-word because no one wants to think about a recession.
There is another word being bandied about these days and it is 'consolidation.' Global consolidation has been very active with more than 30 significant deals announced since January of 2004. Industry consolidation is expected to bring more stability as it evolves and the top 20 steel producers get closer to accounting for approximately 65% of global production by 2015. This will create a truly
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global pricing structure that is very different from what we have now. The market segments will vary as some will be successful while others will not. The consensus is that aerospace, defense, agricultural, power generators and infrastructure markets will remain strong. Automotive, recreational vehicles, heavy truck and residential construction will continue to slide. A growing sector is bridge building since the collapse of the I35 bridge in Minneapolis last August.
Steel distributors will continue to slog it out in the marketplace. We are finding a growing number of suppliers carrying smaller levels of inventory. This creates spot shortages and items that used to be plentiful are now harder to find. This requires customers to be more proactive in their sourcing to be sure that they do not get caught short. We are finding that many of our customers require us to develop stocking plans to protect them from such shortages. Prices have been holding firm. There are modest increases and decreases, but overall pricing is steady. Unless specific items are short in supply, we anticipate this trend to continue. One steel executive summarized it best, "I don't think there is a person in the whole industry, from the heads of steel down to the service centers, who has a crystal ball beyond two to three months." The economy tends to do well in election years, but there is no way to know what the future holds. So with a deep sigh, we confidently lick our forefinger, hoist it high in the air to wait to see which way the wind is blowing.
For a more thorough analysis of specific products and their forecasts, we welcome you to visit us at www.paragonsteel.com and click on 'Steel Forecast 2008' on our home page. |
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A Different Holiday Perspective
Now that the holidays have ended and we move forward into the new year, we have a Paragon Steel employee story to relay. In the final few weeks of last month we instructed our receptionists to give a holiday greeting when answering the telephone. One young girl asked if she could withhold from saying "happy holidays" for personal reasons, because the holiday period was a harbinger of bad times. When asked about those times
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tears welled up into her eyes. She told a story that five years ago on December 20th her brother, then 27, had committed suicide. Her family had become so distraught, that within a week her mother also passed away. So this 16 year old had lost two family members within a week's time. Thus, the holidays still represent a very sad time indeed. |
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Quote of the Month
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| "God made the world round so we would never be able to see too far down the road." |
| – Isak Dinesen |
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