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June 2011- Steel Industry Continues to Face Economic Challenges!

Thursday, June 2, 2011 @ 02:06 PM
posted by admin

As we move towards the end of the second quarter of 2011, the steel industry continues to face economic challenges while remaining in an upward growth trend.

The steel industry is inextricably linked to trends in the greater economy, and is in part affected by general trends. The general domestic economy continues its choppy road towards recovery, although it continues to be plagued by setbacks and lack of consumer confidence. While most economists are certain that the economy is gradually and steadily improving, consumer confidence in May 2011 registered the lowest reading in six months and continues to stay well below the typical reading that signals a healthy level of consumer confidence. Consumer spending, which accounts for a major portion of the general US economy, has been lower in part due to insecurities about labor and income prospects. At the same time, housing prices fell to their lowest levels since 2002 as the housing industry battles an oversupply of foreclosed homes and tighter credit lending. Even as the general economy improves, albeit slowly, the construction and housing industries weigh heavily on associated sectors.

The steel industry is also dealing with its specific challenges. On May 26, 2011, industry and congressional leaders met to discuss the state of the steel industry at a meeting of the Congressional Steel Caucus. Recurring positions taking by steel executives regarded a desire to see increased support for capital infrastructure spending as well as increased tariff protection against foreign steel. Executives seemed particularly challenged by what they termed “dumping” and “unfair competition” from government-subsidized companies, as well as purposefully undervalued foreign currency that promotes export to the US. In general, however, steel executives are expecting revenue to rise for the rest of 2011.

The steel executives’ prediction for 2011 is matched by the US Geological Survey Metal, Institute for Supply Management and the Boston Consulting Group’s newest reports. The US Geological Survey summary, published for May 20, 2011, signals continued growth, although data suggests that growth may happen at a slower rate than in the first part of 2011. The report signals that while geopolitical unrest in the Middle East and North Africa has affected global trade and markets, domestic manufacturing seems strong enough to sustain demand. This analysis is seconded by a new report from ISM, which forecasts increased manufacturing growth as well as possibly higher prices through the end of 2011. Additionally, a study recently came out that expects the next five years could constitute a “manufacturing renaissance” as rising costs of labor abroad cancel out the savings found in producing goods abroad. Such a revitalization of domestic manufacturing would poise the steel industry to see renewed growth and demand.

As the economy slowly but steadily heads towards recovery, Rolled Steel is working hard to monitor market conditions and evaluate inventory position and availability. We are looking forward to remaining your supplier of choice as the economy continues to recover.

~Kaitlyn Plummer

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