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Industry trends in the downturn: A snapshot

In times of great uncertainty, an understanding of long-term industry trends can help executives plot robust strategies. This roundup highlights structural issues likely to influence the future performance of four industries: steel, technology, chemicals, and consumer goods.

DECEMBER 2008

Source: Chemicals Practice, Consumer Packaged Goods Practice, High Tech Practice, Metals & Mining Practice

Exhibit 1: Global steel consumption had been rising faster than GDP until recently, and should bounce back.
Exhibit 2: At the beginning of the current slowdown, IT intensity was below the historical average.
Exhibit 3: During the last two economic downturns, US consumers changed their priorities instead of cutting spending across the board.
Exhibit 4: Economic downturns have depressed demand for petrochemicals.

Steel

As credit markets capsized in the third quarter of 2008, construction projects slowed and consumer spending decreased, stalling growth in the steel industry. Nonetheless, our research indicates that the long-term strength of global steel intensity (the amount of steel needed per dollar of global GDP) will probably fuel growing demand for many years to come, to as much as two billion tons annually by 2025.

As recently as the 1990s, the maturing of markets in Europe and North America reduced the level of steel intensity as the demand curve for automobiles, refrigerators, and infrastructure leveled off (Exhibit 1). Since the turn of the decade, infrastructure and construction projects linked to urbanization—mostly in China but also in India, the Middle East, and other regions—have accounted for more than 35 percent of global steel demand and for more than half its growth. Demand for other metals, such as aluminum and copper, also exceeds GDP growth in these regions.

While their continuing development should support the industry over the long term, the immediate impact of the credit crunch will in all likelihood be reduced demand for steel—not only...