After multiple years of slow, almost imperceptible, growth in the steel manufacturing industry, the outlook for 2014 is positive. Market factors indicate that, due to increased consumer demand and positive manufacturing growth, steel companies can expect to have a profitable year.
According to a recent story from NBC News, the government reported an increase of 3.5 percent in the demand for durable goods including airplanes and machinery for the month. For professionals in the steel manufacturing industry, this increase indicates that the demand for steel will also rise.
After a tough year in 2012, steel manufacturing companies will welcome positive news. In 2012, news broke that scientists are developing an ultra-strong plastic that has the potential to replace steel in many manufacturing processes, depressing investment. Steel manufacturing had a better year in 2013, however, with companies reporting growth of 6.1 percent from September 2012 to September of 2013.
The increased demand for durable goods means that companies in the steel manufacturing industry are cautiously optimistic. The December numbers, which were released by the Commerce Department on December 24, indicate a total monthly increase of 3.5 percent over orders for all types of durable goods. Although the profits from these orders will be spread across a range of industries, this rise could indicate a turnaround for steel production companies.
The December numbers represent a positive upswing, particularly given the dismal performance of past months. In October, the demand for durable goods dropped by 0.7 percent, which left many in the steel production industry worrying about the year to come. With the exception of the transportation sector, the 3.5 percent growth is the highest the market has seen overall since May 2013.
The growth durable goods orders in December is especially welcome news for American manufacturers, particularly given the fierce competition they face around the world. In November, The Energy Collective reported that China produces more than 500 percent more steel today than it did in 2000; in total, Chinese manufacturers are now responsible for making more than half of the steel in the world. Part of the reason for this extreme growth is the increase in the number of construction projects in China; according to The Energy Collective, more than half of the rebar produced around the world goes to Chinese customers.
Although many American steel companies do not deal in international markets, world economies still have an impact on domestic companies. The recent increase in durable goods orders should give businesses in the United States a better chance of increasing their profits and becoming more powerful in the global construction market.
While the US steel market is not out of the woods completely, steel manufacturing projections for 2014 look positive. In combination with the projected growth for the manufacturing industry as a whole, this means that steel companies can expect to bring in new customers and increase their profits in the coming year.
(Photo courtesy of freedigitalphotos.net)
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