Iron and Steel Manufacturing Revenue to Stabilize
The global economic crisis has resulted in a dramatic reduction in demand for steel, according to a report on the iron and steel manufacturing industry from IBISWorld. “When the activity from construction and manufacturing markets took a steep fall, sales in the iron and steel manufacturing industry also contracted,” said Agiimaa Kruchkin, industry analyst.
After revenue plummeted 50.1% in 2009, major participants faced poor market conditions. Revenue rebounded in 2010 and 2011, however, as the economy improved (albeit slowly) and demand for automobiles revived. While demand from developed economies remain relatively weak, causing the price of steel to decline slightly over 2012, revenue is anticipated to remain stable with a marginal growth of 0.1% to $111.3 billion in 2012.
Despite strong growth in 2010 and 2011, the industry’s revenue is anticipated to average an annual increase of 0.2%. In 2009, downstream U.S. demand from automobile manufacturing and commercial construction plunged 36.5% and 29.7%, respectively, while steel prices dropped 25.1% in response to declining global demand. During 2010 and 2011, prices recovered strongly, as demand from the iron and steel manufacturing industry’s major markets bounced back, but not enough to compensate for steep declines during the recession. In addition, “because near-term economic growth in Europe and the U.S. remains uncertain, steel prices are expected to drop 2.9% in 2012,” Kruchkin said.
Output has reportedly recovered since the recession, but increased international competition and rising input costs are expected to force more companies out of the industry. This trend, combined with frequent merger and acquisition activity, will cause the industry’s market share concentration to increase. Nonetheless, over the five years to 2017, fluctuating but generally increasing steel prices and higher output will likely cause revenue to grow at a healthy pace. This growth will be a substantial improvement from the past five years, but will ultimately be minimal compared with the iron and steel industries of competing leading nations.
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