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Steel News May 21, 2020 01:30:03 AM

Credit Suisse Sees “Perfect Storm” Threatening Domestic Steel Companies

Paul Ploumis
ScrapMonster Author
The analyst projected that demand for vehicles will drop by as much as 90 percent during the current quarter.
Credit Suisse Sees “Perfect Storm” Threatening Domestic Steel Companies

SEATTLE (Scrap Monster): The domestic steel industry is heading into “a perfect storm,” according to Credit Suisse.

An analyst with the bank noted in April that plummeting demand caused by the COVID-19 pandemic combined with more steel capacity coming online in 2021 will create significant hardships for steel producers.

“In our view, the impact of COVID-19 and the collapse of US energy is a black swan event for domestic steel companies for which recovery will take time,” the analyst wrote, according to SteelGuru.com. “However, time is running out on the shot clock as 8 million tons of new sheet capacity is set to enter the US over the next 12 months to 18 months. This is a perfect storm for steel companies, which have a high degree of operating leverage and rising financial leverage via major capital investment plans and or acquisitions.”

The analyst projected that demand for vehicles will drop by as much as 90 percent during the current quarter. The automotive sector accounts for more than one-fourth of steel consumption in the United States. The energy sector is responsible for about 8 percent.

Courtesy: AIIS