The Effects of the Recession on the Steel Industry

The global recession over the last couple of years has had an effect on many, and the steel industry is no different. It has become less in demand as the recession has hit. The problem the steel industry has in such times is that the knock-on effect of the troubles of other industries often means a reduction in steel production. So many products use steel in some form so the knock-on effect can be massive.

A good example is the automotive industry. Steel is an essential material in all cars the demand for new cars has fallen during the current financial woes. There is hardly an automotive manufacturer whose production hasn’t lowered since the recession hit. As far as the steel industry is concerned it is simple; less cars being made means less steel is required. Cars are not cheap, so buying a new one ceases to be a priority for many during a time of economic uncertainty. In the UK the new car market has been helped somewhat by the scrappage scheme, whereby consumers are offered £2,000 off a new car if they trade in a car that is more than ten years old.

Steel itself is not a consumer product, but it is used in so many other products so any item that is produced less than previously leads to less steel production. In terms of production many manufacturers across all industries are being cautious. They are not producing as much as they normally would in fear of not being able to sell as much. Many are waiting for confirmed orders before purchasing raw materials. And with steel being an important material in so many products it obviously has an impact.

The positive of steel is that it is always needed. With it playing a role in so many products it will always be in some demand. But this can also be its problem. As it is used in almost everything whenever production is reduced, for any product and for any reason, it will have an impact on the steel industry. In a recession so many industries are affected all at the same time so its impact on steel can really be significant. It is not just consumer products that use steel but state construction in things like roads, bridges, schools and hospitals. Reductions or increases in the number of new homes also significant.

At its low point steel production in the United States went down to its lowest point since 1980’s and the so called Rust Belt years. This was a time when American steel was of poor quality compared with other countries so much steel was imported, therefore reducing the demand for American-made steel. American steel improved thereafter and steel manufacturing increased again. The current problems are for completely different reasons and not just confined to the United States. Production began to fall in August 2008 and by the end of that year had dropped to about half of the previous production. Four or five months on and production began to slowly increase again. It is still not at its previous level but is back on the increase as the world slowly comes out of recession.

As part of their stimulus to relieve the effects of the recession the U.S. government has put around $115 billion aside for improvements in infrastructure. The purpose of this is to create and protect jobs across a variety of industries. Because of its role in so much production the steel industry is amongst those who will reap the benefits.

Andrew Marshall (c)

Longulf - Steel Suppliers - Longulf Trading is a London based international trading company catering to distinct and diverse procurement needs of a number of industries across the globe, including steel, paper, chemicals, and food raw materials.