Leaping off a cliff might sound like fun to the adventurous,
hang-gliding type, but for businesses trying to stay airborne
in the current economic environment the feeling is more akin to
losing an engine in mid-flight.
For metal players trying to avoid a financial crash and
burn, the only option is to land with minimal damage-not an
easy feat as low industry demand stiffens competition among
suppliers fighting for the few orders available.
The tool steel products market, for one, "has fallen off a
cliff," according to Dave Murray, senior vice president of
Latrobe Specialty Steel Distribution, Marlborough, Mass. "When
most of our customers are laying people off or working short
hours, you can't expect increased steel orders. Most of our
customers are working down inventory. Many say they are at the
lowest level they've had in many years, and they don't want to
bring in extra material because they are afraid it will just
The company began to see orders diminish during the third
week of November, which Murray attributed to demand declines in
the housing, automotive and heavy industry sectors. That lower
demand rate has since been sustained.
Competition for orders has increased, Murray said. "Every
order being quoted is going to eight or nine suppliers rather
than three or four, as in the past, looking for the best price;
and suppliers are looking for the crumbs." It has almost come
to the point where customers "can name the price. It's not
good. We are in a period of distress, but we hope we have hit
Not all sectors of the industry are feeling the same degree
of pain, though.
Sunbelt-Turret Steel Inc., a Charlotte, N.C.-based
multi-branch distributor of carbon and alloy bar stock,
primarily sells to shops that "do specialized machinings, blank
shafts for machinery, just-in-time manufacturing and machine
replacement parts," Jerry Webb, general manager, said. "We
concentrate on large bars and we are not seeing the same
suffering as (suppliers of) smaller diameters used in
Sunbelt's products end up in machinery for paper and sugar
mills, mining equipment and any large machinery requiring
shafts, gears and clutches. The company also supplies shafts
for wind power turbines-"that's probably the hottest industry
now," Webb said-and large-diameter bars for road-paving
equipment. "We do foresee picking up additional business due to
the fact that (President) Obama wants to rebuild roads and
bridges," he said.
In the meantime, competition for orders is tough, Webb said.
"People are still playing with pricing, and there is no firm
stability. They are going up and down on a daily basis."
The availability of some tool steels could become a
challenge by the third quarter due to U.S. production
curtailments and trade rules affecting foreign producers. "We
could end up short" when order rates for mills and distributors
rebound, Webb warned.