Current Economic Condition of Auto Industry Affects Steel Market

Steel, the biodegradable super-metal, is incorporated into countless facets of human life. One of the most widespread uses for steel is the manufacturing of automobiles. The cars that we drive are made up of this lightweight, durable material. However, due to the current faltering condition of the auto industry, steel manufacturers are seeing a drop in sales due to decreased demand for consumer automobiles.

In the United States, the automotive industry accounts for a large portion of steel manufacturing business. In North America alone, automakers produced 16.5 million units in 2006. The projected output for 2009 is 10.5 million units, a 36 percent decline. For those of us living in the Midwest, this economic crisis hits close to home. Detroit and the surrounding area has always been a hub for automobile producers, home to Ford Motor Co. and General Motors Corp. Due to their close link with the auto industry, steel producers and manufacturers are also hard-hit. MCN , or Metal Center News , recently published a survey of 45 toll processing and steel manufacturing companies. The results indicated that a majority of the respondents (57 percent) sighted their business being down by an average of 22 percent in 2008. However, 16 percent claimed flat revenue and 27 percent recorded gains. So, even though the general market trend is headed in a downward slope, there are still companies that site profit.

In this dismal economy, it is important to remember the positives. Chrysler, one of the United States' top three auto producers, has recently declared bankruptcy. However, on May 30, 2009, the auto giant entered into federal bankruptcy protection. With help from President Obama and government funds, Chrysler has partnered with Fiat and will continue to produce automobiles for the American market. Many of these auto companies are forced to merge, considering that current economic conditions will not allow them to stand on their own feet. These collaborations can yield positive and negative returns for steel producers. When one company partners with another, two clients then turn into one, which may result in increased profits. However, steel producers benefit because Chrysler did not go under. The company is still producing automobiles, which means that they will still need steel to make these cars, which is good news for steel producers.

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The author of this article is a representative of Capital Steel & Wire, an international distributor of steel bars, steel wire and wire rods. Visit them on the web at capitalsteel.net .

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