“Although inventory is also being conservatively managed in the supply chain, we continue to see long-term growth opportunities from the oil and gas/chemical process industry markets. Our downhole oil and gas products remain in high demand because directional and horizontal drilling rates are holding up even as the total rig count is declining. In the third quarter 2012, we saw a pause in demand from oil and gas projects that use our flat-rolled products. Inquiry activity for flowlines and vessels made of our high-value flat-rolled products is beginning to increase for both new and replacement projects. In the chemical process industry, demand for our titanium products, while weak for the first nine months of 2012, is showing signs of improvement which we expect will result in increased shipments to this market in the first half of 2013. Our Uniti titanium joint venture received the first phase of an order related to a major desalination project but the related shipments for this phase and anticipated additional volume are expected to occur mainly in 2013.
“Demand from the electrical energy market was essentially flat in the third quarter compared to the second quarter 2012. On the power generation side, demand for our zirconium products from the nuclear energy market remains at low levels. Demand for industrial gas turbines was stable at relatively moderate levels. On the power distribution side, demand for grain-oriented electrical steel (GOES) continued to be impacted by the weak domestic housing construction market. The domestic specialty metals industry association recently confirmed that GOES imports into the U.S. market are surging, and possible dumping and below-cost sales from producers in a number of foreign countries have occurred in the United States.
“Demand remained strong from the medical market for our premium products for both surgical implants and MRI superconducting magnets.
“We expect demand for standard stainless steel sheet and plate to continue at low levels in the fourth quarter as a result of weak GDP growth in the U.S. and aggressive inventory management actions throughout the supply chain. In addition, base prices for most grades of standard stainless products are at historically low levels due to weak demand and high levels of Asian imports. We believe inventory levels of these products throughout the supply chains are lean and base prices are at unsustainable levels. Therefore, our view is that as global economic conditions begin to improve, both demand and base prices will begin to improve.