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North American Metals & Minerals Industry Outlook - September 2009 Update
Like most segments of the industrial marketplace, the Metals & Minerals Industry was hard hit by the economic downturn. A global upswing in demand for raw materials evaporated in mid-2008 after an exciting five-year ride which saw many commodity prices increase to historic highs. The Metals & Minerals Industry is the industry that produces raw materials, including mined products such as coal and iron ore, and primary metals and minerals processed materials like cement and steel. When demand for raw materials began to dry up in 2008, the need to build more capacity dried up as well, and companies began to defer and postpone major projects.
Industrial Info has seen a tremendous amount of work postponed since the fourth quarter of 2008. Industrial Info's Gap Measurement Analysis for the month of July indicates that 43% of the value of projects in the North American Metals & Minerals Industry that were originally scheduled to begin construction in 2009 have been cancelled, postponed or placed on hold. According to Joe Govreau, VP for Metals & Minerals Research for Industrial Info, "At the beginning of 2009, we were tracking about $57 billion, and now we are at $31 billion. This 'project fallout' is up considerably from 2008."
Nowhere was this more evident than in the U.S. steel manufacturing sector, which experienced capacity utilization less than 50% for much of the year. Steel demand dropped, spurred by a slowdown in auto production, as well as slowdowns in residential and commercial projects. This has led to postponements, slowdowns and deferrals of major steel projects including the $4 billion ThyssenKrupp mill under construction in Alabama and a major taconite mine/steel mill complex being developed in Minnesota.
That being said, lately a few signs have appeared that suggest things have bottomed out and are starting to improve. Steel demand is coming back slowly. In the past month, some of the major steel producers, including U.S. Steel (NYSE:X) (Pittsburgh, Pennsylvania) and ArcelorMittal (NYSE:MT) (Luxembourg) have restarted furnaces or are planning to in the near future.
Not many sectors were immune to the downturn, with the exception of some specialty materials sectors such as polysilicon. Polysilicon, the raw material used in solar panels and semiconductors, is in high demand. Every major polysilicon manufacturer is expanding. Two billion-dollar projects just started construction this year in Tennessee.
The mining sector, which includes coal, metals and minerals mining, accounts for about 50% of the spending in the industry and has seen a large amount of postponements. But there are some exceptions to this; several large coal projects are planned, and 2010 should be a year of increased project activity.
There are other smaller trends emerging. For example, the cement-manufacturing industry is evaluating the ramifications of proposed National Emissions Standards for Hazardous Air Pollutants (NESHAP), specifically mercury, at plants manufacturing Portland cement. The recent ruling proposes to implement emission-reduction equipment additions and recordkeeping in order to reduce and monitor mercury emissions at cement plants. Proposed equipment additions depend on the type and size of the pyroprocessing system used at any given plant, along with consideration for the type of limestone and other raw materials heated in the pyroprocessing system.
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