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North America Metal Works Sectors : A Company and Industry Analysis (May 2008)
Mergent, May 2008, Pages: 36
This report updates the previous North American metal works report, focusing on the markets in Canada and the United States
Current Environment - Key Points
- Despite sluggish economic conditions in the US, especially from the housing sector, some US producers of steel, aluminum and specialty metals reported record sales and income during the fourth quarter
- Producers of flat-rolled steel and sheet products did not fare too well during the fourth quarter
Flat- rolled steel is the largest market segment in the US steel industry, and producers faced lower than average realized prices as well as higher input costs
- In the fourth quarter of 2007, most Canadian metal fabricators reported lower earnings due to operational challenges and the downward trend of the country's manufacturing environment
- Between July 1, 2007, and February 29, 2008, the S&P/TSX Composite Index fell 39.6 points or 1.9%
Performance was mixed among the index components, with most metal mining stocks trading lower compared with other stocks such as energy and oil and gas
- Large Canadian metal producers are rapidly becoming a dying breed as a result of being acquisition targets of foreign metal producers as part of an industry consolidation that is creating a small number of huge global players capable of taking advantage of their economies of scale
Industry Profile - Key Points
- The aerospace industry was one of the bright spots in 2007 that boosted demand for US aluminum
The upswing in the aluminum market was due to increased production from both Boeing Co (NYSE: BA) and Airbus (EADS) (FSE: EAD) (PAR: EAD), which bode well for future sales of the metal
- In the second half of 2007, the Canadian steel industry was negatively affected by weak order levels from the US housing, appliance and automotive markets
This response was due to the credit-driven constraint in US consumer spending
- According to the Metals Service Center Institute (MSCI), domestic steel product shipments from Canada for the whole of 2007 were 3.7 million tons, down 6.7% from shipments of 3.97 million tons in 2006
- Canadian aluminum shipments for the whole of 2007 totaled 119,800 tons, down 3.9% from 2006 shipments
Market Trends and Outlook - Key Points
- Research on new magnetic materials composed of chains of nickel-oxygen-nickel atoms could boost the use of the metal in the design of devices and materials for quantum information processing
- US copper faces a mixed outlook due to the country's housing slump and the weakening US currency
However, looming strikes in South America and falling inventories may boost copper prices in the near term
- US steel companies are being pressured to cut jobs due to high steel prices and the lackluster performance of the automotive and housing industries
- In the US, metal theft is on the rise due to the soaring price of, among other materials, copper, aluminum, and bronze
- According to NRCan, total expenditures by junior project operators have increased from C$175 million (US$172.5 million) in 1999 to C$1.7 billion (US$1.68 billion) in 2007, and are expected to reach C$1.8 billion (US$1.77 billion) in 2008
- The expected 5.8% rise in global molybdenum demand in 2008 is good news for molybdenum producers in Canada, as the country is one of the biggest suppliers of the metal.
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