Forecasting the economic future is certainly an inexact science. Yet, as we close out 2019 and look to the new year which is fast approaching, it is beneficial to examine current trends and conditions and make as good a prediction as possible about the steel market that is so important to all of our continued success.
The market has been unspectacular but steady in the 2nd half of this year: unemployment is low, non-residential construction has remained consistent, the GDP is respectable, the price of oil has remained relatively stable, inflation has been held in check, and housing starts have held their own. Most of our customers are fairly busy, and many are cautiously optimistic about 2020.
Looking ahead to 2020
It is far too early to tell how the political situation will affect the economy, but election years typically tend to buoy the status quo. Expect import tariffs to continue (at least in the short term) and the current business-friendly administration to support ways to foster economic growth.
The Wall Street Journal & Goldman Sachs are predicting small gains in GDP (+2.1%) and non-residential construction (+2.4%) along with continued stability for oil ($59 avg) and unemployment (3.8%).
Thinking in terms of tonnage, the domestic steel-producing mills were down more than expected in 2019 (after an excellent 2018) which was reflected in softer pricing. Not surprisingly, most mills are forecasting slow growth and a modest increase in tons and price (2 to 4%) for 2020.
At Boyd Metals, we have seen mill cost slide down in 2019, but present data shows us to be at very close, if not at the bottom. We look for demand to remain flat for the rest of this year and into the 1st quarter of 2020. We remain optimistic that we will see a bump up in activity (and price) in the 2nd quarter. By then, the political scene will be heating up and there is no reason to expect any significant downturn in the economy through the summer. After that, all bets are off!
The Bottom-line for Boyd Metals
Boyd Metals spent more money on new equipment and company infrastructure in 2019 than in any other year in our history. Regardless of how other service centers think, we remain bullish on the economy and completely committed to providing our customers the best value in the industry.
We are preparing for a good year: plenty of inventory, brand new processing equipment (including three laser cutters), a dependable fleet of trucks, and the very best people up and down the line. Whatever may come in the months ahead, Boyd Metals promises to be your GO-TO service center in 2020.
We thank you for entrusting your business to us and we look forward to continuing to grow together. As things in the market change, we will continue to keep you updated. Subscribe to our blog to make sure you stay up-to-date with the industry and what's happening at Boyd Metals.