N. America galvanizing to grow 2-3 pct in 2012

Tue Feb 28, 2012 12:00pm EST

* Solar market remains a driving force of growth

* Diversity of markets putting industry on growth track

By Chris Kelly

RANCHO MIRAGE, Calif., Feb 28 (Reuters) - The North American galvanizing industry looks poised to grow by 2 to 3 percent in 2012, as it extends its recovery from 2008's global financial crisis, executives said at the International Zinc Association's 2012 conference.

Building on a relatively strong performance in 2011, where total production of galvanized products in North America grew by an estimated 13 percent, the industry's outlook continued to brighten, with the help of some key markets, particularly solar, they said.

From the posts and outside frames of solar panels to the transmission lines needed to connect newer solar and wind fields to the electrical grid, the alternative energy market has and will continue to offer "significant tonnage" for virtually every galvanizer, keeping the industry on a positive growth track this year, said Tim Pendley, senior vice president and chief operating officer with AZZ Inc.

"I anticipate an overall growth rate of 2 to 3 percent in the coming year. The solar market was and remains the driving force for growth in 2011, and is projected to remain a significant player through 2016," he said.

Pendley estimated that nearly 4 percent of the 2011 galvanized steel products went into the solar market.

In the aftermath of 2008's global economic downturn -- considered to be the worst financial crisis since the Great Depression of the 1930s -- the North American galvanizing industry was hit hard, dropping 15 percent in 2009 and 5 percent in 2010.

Phillip Rahrig, executive director of the American Galvanizers Association, said 2012 has already gotten off to a promising start.

"Galvanizers have come out of the shoot very strong. Guys are very bullish for this year ... because 2011 was a relatively good year in pretty much horrible economic condition," he said.

"Most companies have a lot of cash, but the question is whether they are going to spend it here in North America or spend it elsewhere.

"A lot of it has to do with whether they see the U.S. economy growing faster than other countries around the world," he said.

A recent stream of generally upbeat data has shown that the U.S. economy is beginning to show some signs of life.

A pickup in manufacturing activity in January, coupled with better-than-expected employment and housing numbers all point to a healthier economic condition this year.

The U.S. economy grew at a 2.8 percent annual pace in the last three months of 2011, its fastest rate since the spring of 2010.

About 30 percent of zinc consumption in North America is used for galvanizing, a process in which fabricated and structural steel, castings, or small parts are immersed in molten zinc, resulting in a metallurgically bonded alloy coating that protects the steel from corrosion.

Aside from the alternative energy markets, demand from some traditional markets like original equipment manufacturers (OEMs) and bridge and highway has offered very good growth opportunities for the industry, Pendley said.

"The bridge and highway market is one of the bright spots. Over the next 5 to 10 years, I anticipate that this market will grow to 15 to 20 percent of consumption," he said.

The agricultural market is an up-and-coming market that will likely be another growth story, he said.

"With the decline of the family farm, we are seeing that corporate farming is recognizing the loss of capital caused by corrosion, and we are seeing an increase in inquiries as to the lowest cost of ownership," he said.

"I estimate this market will have significant opportunity for us," he said.

Nearly four years removed from 2008's economic problems, the outlook for the U.S. economy in 2012 is looking better.

The U.S. Federal Reserve estimated 2012 economic growth of roughly 2.5 percent, in line with the growth estimates for the North American galvanizing industry.

"Hot Dip Galvanizing is a GDP-driven industry," Pendley said.

"We have suffered through economic turmoil in the past several years, and although we have not returned to the high-water mark in 2007, the diversity of markets that we serve has minimized the negative impact and has put the galvanized industry back into a growth mode."

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