Poor growth for US metals sector


metalEven if accelerating economic expansion will drive metal production and consumption, US metals sector will see modest growth through 2018. Our expectation for accelerating real GDP growth in the coming quarters underpins our view that the metal sector will see modest growth over a multi-year period. We forecast real GDP growth of 2.6% in 2015, up from 2.1% in 2014. Moreover, we forecast average annual growth of 2.4% in 2016-2018. Gains in non-residential construction, automotive production, and oil and gas investment, should lead to steady, albeit low, demand growth for refined metal products. However, elevated inventories, weak foreign demand, and increased competition from cheap imports will limit production growth.

We expect the US to continue importing significant quantities of refined metals, such as aluminium, copper, and zinc, as well as bauxite ore. Though the US exports some metal, we expect that the bulk of metals sector production will be used for domestic consumption rather than for export abroad. We also note that domestic US companies will dominate production of their respective metals, although laws on foreign ownership of US based companies enables some foreign companies to operate as well, with various foreign steel firms maintaining US operations. We expect metals consumption in the US will be driven largely by growth in the construction, auto, and manufacturing sectors. We forecast the construction industry will grow 0.9% on average per annum to 2018, with the auto industry expanding 2.9% on average. Non-residential construction will increase demand for heavy machinery, as well as refined metal inputs.