Auto, Energy Sectors to Lead U.S. Steel Industry Growth in 2012

The U.S. steel industry showed signs of recovery in 2011, but rising raw materials prices and low capacity utilization rates continue to challenge the sector. The industry is not expected to reach a full recovery until 2013, according to Fitch Ratings. Demand is picking up in the auto, energy and heavy-equipment manufacturing segments, while construction has bottomed out, Fitch reports. Capacity-utilization rates below 80% combined with high raw materials costs could negatively impact margins in 2012, the rating agency says. Flat-rolled capacity increases from mill expansions in the United States may take up to 18 months to be absorbed. Steel producers are being cautious about how much inventory they're stocking, including raw materials, on fears of a downturn, said Monica Bonar, senior director at Fitch. Demand from the auto industry should continue to increase in 2012, said Larry Kavanagh, president of the Steel Market Development Institute, a business unit of the American Iron and Steel Institute. Sales in NAFTA countries should grow by approximately 1 million units in 2012 to 14 million, Kavanagh said. "There's a lot of pent up demand for automobiles because the population has been conserving cash," Kavanagh said. Weakness remains in the residential-construction market, which isn't expected to gain strength until mid-decade, Kavanagh said. Growth will likely be at the low end of construction industry projections of 17% to 34% growth in 2012, he said.

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