NEW YORK (TheStreet) -- Steel executives are spooked.
At least, that's how it looks according to the results of a new survey of steel-industry C-suites in North America, compiled by
, a Pittsburgh-based industry data provider.
According to the survey, conducted weekly, 83% of executives now believe that prices for plain carbon steel will weaken over the next three months. That's a precipitous jump in negativity from last week, when 69% of the industry's topsiders were expecting softer prices. The Index's survey queries some 500 managers throughout the steel supply chain, including mills, distributors, service-center operators and steel end users.
If these managers are right, it would mean more difficult times for a sector still struggling mightily to emerge from the recessionary doldrums, with profits squeezed on the one hand by rising raw materials costs and on the other by customers unwilling to accept price hikes.
has indeed dimmed:
in recent weeks to account for the squeeze.
Steelmakers outside the U.S. have also had a tough time: South Korea's Posco, for instance, disappointed investors when it reported a 9% decline in earnings for its third quarter, mostly because of dearer raw materials costs. The switch to a short-term iron ore contract between world steelmakers and their mining company suppliers has resulted in rising costs for the mills.
Unsurprisingly, stocks in the sector in the U.S. have been caught in a range since July. Even the vertically integrated
, which controls its own raw materials sources, hasn't performed well. Its stock hasn't traded above $50 since May and remains in idle, 37% below its year high of more than $70.
This week's increase in bearishness comes as some steel experts have predicted a global tightening in supply -- and thus a global rise in prices. The rationale behind that scenario was that China, home to the world's largest steelmaking industry, was in the midst of shuttering a bunch of its old, energy-inefficient, high-polluting mills, thus taking offline some portion of its total capacity.
It's true that certain categories of the steel business in the U.S. have improved, albeit mildly: appliances and automotive, for example, continue to rebound. But the construction segment, one of the largest steel end markets in North America, has all but ceased to exist. Until the nation starts erecting structures again, steel stocks won't rally, analysts say.
On Thursday, steelmaker shares were mostly lower. AK Steel was falling 2.4% to $14.27, Steel Dynamics was down 1.2% to $14.58, Nucor was slipping fractionally to $39.97, and U.S. Steel was losing 1% to $44.37.
-- Written by Scott Eden in New York
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