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The steel (general) industry is expected to struggle in 1999, although prospects for the industry may improve in 2000. Companies in this sector of the steel industry exhibit strong fundamentals, but the lack of profitability, despite a continuing economic expansion, will hurt performance. However, the long-term prospects for this industry remain solid.

The nonintegrated steel industry outperformed the market in 1994, thanks to a resurgent US economy. This group, consisting of companies that manufacture carbon steel from scrap in electric arc furnaces, plus other carbon steel and specialty makers, has proved financially stable, even in downturns. It enjoys low labor costs, modern facilities and healthy geographic expansion. Still, investors should stick with Nucor and other proven companies.

The prospects for steel industry stocks are evaluated. The industry has made an impressive comeback, and its recovery should continue through 1995, if the economy's slowdown is held in check. The nonintegrated steel sector's structural and cyclical underpinnings appear to be sound, and its long-term prospects are bright. Evaluations of individual stocks are included.

The nonintegrated steel industry is exhibiting a strong forward momentum, though over the long term, growth could slow. Companies in this industry, which use electric arc furnaces to produce carbon steel from scrap, have improved their fundamentals. Shipment volume continues to grow higher, with estimates of 90 million tons of steel being projected for all of 1994. Investors in this market should not expect to see declining prospects until after 1996.

The integrated steel industry earnings should continue to improve in the 2nd qtr and 2nd half of 1994. However, the volatility of the steel cycle can be greatly exaggerated and investors may want to carefully consider investing in this industry. Integrated mills are reporting higher orders and better pricing. Industry analysts forecast that the mills will ship 90 million tons of steel in 1994, over 88.4 million tons in 1993. Steel prices have increased by about 10%.

Integrated steel industry strength during the last three quarters of 1993 should continue during the first quarter of 1994 at least and probably into 1995 with increased tonnage and more favorable pricing. Stocks at Inland Steel, Bethlehem Steel and the USX-US Steel Group should appreciate. Potential investors should be aware that earlier long-term undervaluation of industry stock has been lessened by recent stock strength.

The integrated steel industry is starting to show signs of economic recovery and industry analysts are recommending steel stocks on a selective, long-term basis. Steel export levels have increased from 1.2% to 4.3%, the number of employees has declined to 140,000 from 243,000 and the percentage of continuously cast steel has risen to 79.3% from 32.1% between the years 1983 and 1993. Analysts see a stronger recovery in 1994.

As Rob Cushman listened to his guest, he glanced at the calendar and clock on his desk: July 13, 1992, 5:45 p.m. They burned a permanent image in his memory. [...]

Armco Inc is protecting its pension fund gains on the bond and stock markets by hedging. Collars, caps, and other derivative strategies are being used as a hedge against a fallback. All of the fund's 40% domestic fixed-income and 40% domestic equity allocations, which total $1.52 billion, are covered by the hedge. Armco had a 13.5% gain in fixed-income and 23% to 24% gain in equities in the year through Jul 1995.