New York (Platts)--6Jan2009

The early 1980s were not good years for the US steel sector, and most
recently, raw steel production in the US in the final week of 2008 dropped to
levels not seen in the past 26 years, according to data reported Monday by the
Washington DC-based American Iron and Steel Institute (AISI).

Steel production in the US for the week ended December 27 was 800,000
short tons, down 22% from 1.02 million short tons in the previous week ended
December 20, and down 61% from 2.04 million st produced in the final week of
2007.

Steel producers operated at only 33.5% of industry capability in the
final week of 2008. In December 1982, the domestic industry's capacity
utilization rate was 34%. In other words, nearly two-thirds of steel mill
capacity was idle both then and most recently, reminding some observers of
market conditions during the Rust Belt years when US steel mills were failing
and shutting down across the country.

Dan DiMicco, chairman and CEO of steelmaker Nucor said it is "the worst
economic slowdown in our lifetime," and told the New York Times recently that
the government?s forthcoming economic stimulus program should contain
buy-American provisions.

Production rates improved in the week ended January 3, but still remained
at depression-era levels. Industry output inched up to 866,000 st from 800,000
st. That represented a capacity rate of 36.3%, according to the AISI.

The lowest capacity utilization rates on record were posted during the
Great Depression. Averaged for the year, 1931 clocked in at 38% capacity
utilization; 1932 marked the bottom at 20%; 1933 checked in at 34% and 1934
saw 37% capacity utilization. The slowest week? During the Fourth of July
holiday week of 1932, steel production dropped to 12% capacity utilization
from 15% the week before. The summer of 1932 also saw construction projects
down 62% from 1931. Carmaking declined 50% compared to the year before, and
railroad car loadings were down 30%, according to Survey of Current Business
archives.

South and Midwest mills carry load

The majority of steel mills in the South and the Midwest reported
slightly higher output following the Christmas and New Year holidays.

The South produced 226,000 st (+5.1%), the Indiana/Chicago area produced
257,000 st (+7.9%), and the remainder of the Midwest produced 106,000 st
(+8.2%). Pittsburgh/Youngstown produced 98,000 st (+22.5%); the Northeast was
91,000 (+1.1%), Detroit was 28,000 st (no change), the West was 42,000 st
(+20%), and Lake Erie was 18,000 st (+12.5%).

AISI's weekly figures are based on estimated raw steel production from a
sampling of steel producers representing about 50% of US steel manufacturing
capacity.