Global output in 2009 likely to drop the most since 1932

Synchronized global economy = Wild Card Developments Galore

Wild cards are now “the norm” in the global steel industry.  Unexpected occurrences have become commonplace since the summer of 2008 for a variety of reasons; but, particularly, the massive decline in the new orders for steel.  With production down one-third or more for many steel companies since last summer, the challenge for them now is to be a good, not a great, performer – i.e., to do better than just survive – in a de-leveraging world.  The steelmakers’ efforts are hampered by the dire straits of the global economy.

The global economic outlook is tenuous because three of the four components of the non-Chinese global economy – households, enterprises and financial institutions – are de-leveraging.  The fourth component – government – is increasing leverage by engaging in massive deficit spending.  However,  as long as the groups engaged in de-leveraging keep it up, the governmental efforts to boost aggregate demand may not, on balance, be sufficient to stimulate much, if any, global economic growth.

Steel industry scenarios for 2009-2011

New events and relationships will occur at warp speed in the next few years because the global economy is synchronized on a financial, real GDP and industrial production basis.  Compounding the uncertainty is the speed at which governmental stimulus programs help to sustain economies. 

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