Steel Prices, Production Drop as Economy Wanes

WASHINGTON — Steelmakers are cutting production in response to the declining demand and decreasing prices in domestic and global markets impacted by deteriorating worldwide economic conditions.

Weekly domestic raw steel production declined by almost 4 percent from more than 1.94 million tons to 1.86 million tons during the first half of October, while the capability utilization rate decreased from more than 81 percent to about 78 percent, according to the American Iron and Steel Institute.

Prior to the economic downturn, experts projected a steel shortage with high prices and profits for 2008 through 2009. Large steelmakers reported record earnings in the second quarter of 2008 and third-quarter profits were also expected to be healthy.

However, in recent months, the price of hot rolled sheet steel decreased approximately $100 from a price-point high of $1,100 per ton. From July to August, U.S. steel mill shipments decreased more than 3.5 percent from nearly 9.2 million tons to about 8.9 million tons, according to the AISI.

With inventory levels remaining high and steel prices expected to continue to decline as supply outstrips demand, companies, including ArcelorMittal and U.S. Steel Corp., began adjusting to the changing market conditions by cutting production.

During the last week of September, steel output decreased to an 18-month low of 1.98 million tons. Many producers take mills and plants off-line for scheduled maintenance during de-pressed times the business cycle, experts say.