The steel sector, even with some strong recent quarters from companies, looks weak, as over the next five years it is projected to grow at a pace of about 5 percent or less annually, placing downward pressure on steel producers like China Precision Steel, Inc. (Nasdaq:CPSL), Grupo Simec S.A.B. de C.V. (AMEX:SIM), Olympic Steel Inc. (Nasdaq:ZEUS), Worthington Industries, Inc. (NYSE:WOR) and Carpenter Technology (NYSE:CRS). And that's the more positive outlook by most analysts. A large number don't believe growth will even happen at that rate.
A majority of steel companies are being pressured to increase prices on their products in order to protect margins and earnings as the price of inputs and commodities rise.
That's not to say steel demand is falling completely, because it's not. But rising demand in some segments doesn't guarantee rising profits, as the industry is experiencing. A number of weak economies around the world could cut also into demand if steel prices and products rise to prohibitive levels.
There's no way to spin the outlook for the steel industry positively. The industry will struggle for years even in the midst of strong demand in some segments, as they attempt to work out the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from producers.
Olympic Steel closed Friday at $29.37, falling $0.70, or 2.33 percent.
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