The struggling economy hasn't prevented one part of the Rust Belt from looking like somebody gave it a good shining with a steel wool pad.
Once a landscape littered with job losses and plant closures, the steel industry is back in a big way. Prices for hot rolled band steel, a widely followed benchmark, have nearly doubled from the beginning of last year to a record of more than $1,100 a ton, Metalprices.com and SteelBenchmarker say.
And rather than being the Who's Who of Chapter 11 companies that they were a decade ago, steel companies are seeing their stocks soar. The Market Vectors Steel exchange traded fund, which mirrors the industry's stocks, is up 62% over the past 12 months and 23% this year. That blows away the 7% drop in the benchmark Standard & Poor's 500 index the past 12 months and 4% drop in 2008.
"Steel was seen as a mature cyclical business not showing much growth," says Mark Parr, analyst at KeyBanc Capital. But now, steel "has become a legitimate growth sector again."
Or, as Olympic Steel zeus CEO Michael Siegal puts it: "There's not a lot of rust anymore."
Steel's recovery is certainly another example of how global demand for commodities is breathing new life into raw materials ranging from potash to wheat and corn. Steel is just one of the latest metals to get swept up in the worldwide metals boom, says David Behr of Metalprices.com.
Globalization is certainly a big reason why steel is enjoying some of its best days since Andrew Carnegie's era. Much of steel's success also speaks to how a seemingly down-for-the-count industry reinvented itself after a painful restructuring process that took decades to unfold. The key events that have polished steel in the minds of investors include:
Booming global demand.
Perhaps the best thing going for steel is the world's insatiable appetite.
In the USA, companies use about 130 million tons of steel a year. Of that, about 110 million tons are produced domestically, says Bob Richard at Longbow Research.
That means the shortfall must be imported from other countries. The trouble, though, is that the rest of the world needs steel, too. Governments and companies in China, India and Russia are on a building spree putting up bridges, airports and skyscrapers. So mills in their nations are not exporting to the USA as they once did. China, for instance, has a plan to build 97 airports by 2020, says Chip Hanlon, president of Delta Global Advisors.
"Global growth is starting to overrun us," says Olympic Steel's Siegal.
And the result is declining worldwide inventory, says Sam Halpert, senior analyst at Van Eck. "We've had a big destocking," he says.
A string of bankruptcy reorganizations of the USA's most storied steelmakers leading up to 2000 allowed the industry to mend itself, Halpert says.
Some of the biggest changes occurred in 2002, when financier Wilbur Ross began forming International Steel Group. Amid a steel depression, ISG gradually bought some of the nation's top steel mills, starting with LTV and then Bethlehem Steel, Weirton Steel and Georgetown Steel.