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So-called Jobless Recovery Concerns American Steelmakers


Friday, April 23rd, 2010

A number of American steel companies like Nucor (NYSE:NUE), expressed at the Critical Commodities Conference that the alleged economic recovery, which doesn't include jobs being created, is a challenge going forward, as if people aren't working they're not going to buy products.

In a contradiction, some steel company CEOs said that while the economy seems to be in recovery, once government gimmicks like the first-time buyer tax rebates for homes the cash for clunkers money is finished circulating through the economy, where will that leave consumers, and how confident will they be.

On the one hand some acknowledge it is only the government subsidies which have generated spending, but on the other talk about a recovery. The two are opposites of one another, and once the props are removed, there isn't much left but the skeleton of an economy which will reveal it has no flesh on it.

When you take into account the approximate unemployment level remaining at close to 10 percent, and the real numbers more like 16-17 percent, it's easy to see why the steel companies and their executives are concerned over the future.

Nucor CEO Dan DiMicco was strong about the issue, saying if jobs aren't being created and very little commercial building going on, where will that leave industry growth.

DiMicco said, “We have serious concerns that capacity being brought back will get ahead of the demand in the marketplace because the economy isn’t really growing, we are not creating jobs. We are not seeing a lot of commercial construction, nonresidential construction, so it’s a concern."

He added that this should be a concern for anyone in the industry, especially now that several steel companies in America are about to restart blast furnaces, which will throw an additional 8 million short tons of capacity into the marketplace, which could drive down prices depending on demand going forward.

As the data show, there is nothing to indicate there will be changes in this sector and businesses related to it in the U.S., and that will make it tough for steel companies in the year ahead, as margins could be pressured downward by excessive supply while steel demand is level of falling.



Article by Gary B

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



Tags: american steel industry , jobless recovery , nucor , steel demand , steel supply