US plan for big steel accompanies sales pickup
President Carter's announcement of a package of measures to aid US steel manufacturers only adds to the good news the industry has heard lately. Orders for carbon, alloy, and specialty steels are up, Iron Age magazine indicates. Within the specialty field, gains are being registered by stainless sheet, stainless bar and wire, and tool steels.
The broad advance reflects a general depletion of inventories. Service centers and others are getting their steel stocks down to desired levels and are starting to resume more normal buying.
Order levels, which fell to around 50 percent or lower in the summer, are now over 70 percent of cpacity. Steel shipments will be up at least 2 million tons in the fourth quarter. A producer of alloy bars now looks for the fourth quarter to match the first quarter of 1980.
Specialty steel producers say there are still sharp day-to- day fluctuations in order rates. There is still uncertainty, but the trend in both orders and inquiries is upward. And again, the improvements is broad-based.
Some of the September volume is due to hedge buying before price increases announced for early October. Plate and structural prices are scheduled to go up next month. Major producers have saidthey will withdraw the price discounts offered since July on sheet and bar products.
However, there was no decline in orders when people began booking tonnage for delivery after the price increases. No letdown is indicated for shipments in October.
Hedge buying has been minimized by the continued pressure on sheet and bar prices. While across-the-board discounts may be terminated, it's likely that some amount of selective discounting will continue. In the present competitive market, the incentive to hedge is limited.
In discussing the revovery, steel officials emphasize that all gains must be related to the very low starting point. The orders of an alloy mill have doubled since "free fall" last summer. Demand has come back from a level that was only 30 percent of capacity. At that point, the plant didn't have enough business to operate. Like many of its customers, it shut down for several weeks.
The export market has provided a surprising lift for domestic steel producers. For the last five years, export tonnage has been negligible, running between 2 and 3 million tons annually. In April of this year, exports rose to 321,000. Since that time, exports have been running at an annual rate of 4.3 million tons.
A potential source of strength is the auto industry. Automotive demand for sheet has come back a little, but it remains far below normal.
If auto sales and production regain anything like normal levels, the added requirements for steel could turn the whole market around. The potential for improvement is indicated by the fact that shipments of steel to the auto industry in the first half were down nearly 57 percent from the first half of 1979.