Steel's (PKX) (NUE) (X) (AKS) Pressured on Low Growth Outlook

The steel industry is uninspiring as over the next five years it is expected to grow at a pace of 5 percent or less annually, putting downward pressure on steel producers like POSCO (NYSE:PKX), Nucor (NYSE:NUE), US Steel (NYSE:X) and AK Steel Holding Corporation (NYSE:AKS). And that's the more positive outlook from some analysts.

Many steel companies are being forced to increase prices on their products in order to protect margins and earnings, as the price of inputs and commodities continue to surge.

That's not to say steel demand is declining, because it's not. But rising demand doesn't guarantee rising profits, as the industry is finding out. Weak economies around the world could cut into demand if steel prices and products rise to prohibitive levels.

There's no way to spin this positively. The industry will struggle for years, even in the midst of strong demand as they try to figure out the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from them.

AK Steel Holding closed Friday at $15.78, falling $0.40, or 2.47 percent. US Steel closed at $52.80, down $0.91, or 1.69 percent. Nucor ended the session at $46.42, dropping $1.05, or 2.21 percent. Posco closed at $112.50, falling $0.05, or 0.04 percent.

Steel's (MTL) (CMC) (CPSL) (SID) (GSI) Pressured on Low Growth Outlook

The steel industry is uninspiring as over the next five years it is expected to grow at a pace of 5 percent or less annually, putting downward pressure on steel producers like China Precision Steel, Inc. (Nasdaq:CPSL), Commercial Metals Company (NYSE:CMC), Companhia Siderurgica Nacional (NYSE:SID), Mechel OAO (NYSE:MTL) and General Steel Holdings (NYSE:GSI). And that's the more positive outlook from some analysts.

Steel companies listed represent a good cross section of the industry, as they're based in several countries.

Many steel companies are being forced to increase prices on their products in order to protect margins and earnings, as the price of inputs and commodities continue to surge.

That's not to say steel demand is declining, because it's not. But rising demand doesn't guarantee rising profits, as the industry is finding out. Weak economies around the world could cut into demand if steel prices and products rise to prohibitive levels.

There's no way to spin this positively. The industry will struggle for years, even in the midst of strong demand as they try to figure out the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from them.

Mechel OAO closed Friday at $30.07, falling $0.65, or 2.12
percent. China Precision Steel, Inc. closed at $1.65, down $0.04, or 2.37 percent. Commercial Metals Company ended the session at $16.93, dropping $0.37, or 2.13 percent. Companhia Siderurgica Nacional closed at $16.83, falling $0.06, or 0.36 percent. General Steel Holdings ended trading at $2.29, down $0.04, or 1.72 percent.

Steel Firms (MT) (CRS) (SCHN) (STLD) Pressured on Low Growth Outlook

The steel industry is uninspiring as over the next five years it is expected to grow at a pace of 5 percent or less annually, putting downward pressure on steel producers like ArcelorMittal (NYSE:MT), Carpenter Technology (NYSE:CRS), Schnitzer Steel Industries (NASDAQ:SCHN) and Steel Dynamics (NASDAQ:STLD). And that's the more optimistic outlook by analysts.

Many steel companies are being forced to raise prices on their products in order to protect margins and earnings, as the price of inputs and commodities rise.

That's not to say steel demand is declining, because it's not. But rising demand doesn't guarantee rising profits, as the industry is finding out, and weak economies around the world could cut into demand if steel prices and products rise to prohibitive levels.

There's no way to spin this positively. The industry will struggle for years, even in the midst of strong demand as they try to figure out the balance between steel demand, rising inputs, and ability for companies and countries to afford price increases from producers.

Steel Dynamics closed Friday at $18.73, falling $0.47, or 2.45 percent. Schnitzer Steel Industries closed at $63.26, down $0.51, or 0.80 percent. Carpenter Technology ended the session at $41.97, dropping $0.47, or 1.11 percent. ArcelorMittal closed at $36.86, falling $0.04, or 0.11 percent.

How Caterpillar (NYSE:CAT) Will Fight Higher Steel Prices

The price of steel has been skyrocketing, and some companies, including Caterpillar (NYSE:CAT), are taking steps to mitigate the challenge as much as possible.

One major strategy of Caterpillar has been to acquire more inventory in order to offset higher prices.

Other companies with significant exposure to steel have also been doing the same, according to the Metals Service Centers Institute, which said inventory levels have risen to 27 months from 2.4 months in December.

Some say this is a risky strategy because if steel demand slows down, a company is left with too much inventory. It can also create a scenario of artificial demand, which will drive up prices.

Of course those prudent enough to acquire steel at lower prices don't have to worry about that issue, at least in the short term.

Caterpillar also said increasing sales volumes could take care of the price increases in steel, or they may ultimately have to pass on price increases to their customers.

Material costs for steel with Caterpillar account for less than 20 percent of the overall material cost to build their equipment.

Caterpillar closed Wednesday at $99.09, gaining $1.08, or 1.10 percent.