Is 2009 over yet? With investors moping around over trillion-dollar deficits and rising unemployment, some are undoubtedly wishing we could fast-forward to 2010.
Not so fast! The more dire things look, the more likely we are to see the stimulus package from the incoming Obama administration reach truly massive proportions. For scrappy steelmakers like Schnitzer Steel
Schnitzer Steel released earnings this week for the fiscal first quarter of its fiscal 2009 year, and the numbers were not pretty. After inventory writedowns of $52 million, the company posted a net loss of $34 million, compared to a record gain of $126 million just one quarter ago. With steel prices remaining below the average realized price for the quarter, the outlook for the next quarter looks grim indeed. Responding to the "unprecedented drop in demand", the company announced plans to reduce its workforce by 10% and curtail output by a massive 40%.
When it comes to absorbing bad news, I'm a big fan of keeping things in context. For example, while these results look horrendous compared to the previous quarter, when metal prices were through the roof, a look at the prior year's comparable results proves far more insightful. Even as painfully low scrap metal prices ravaged shares of leaders like Commercial Metals
Secondly, when considered alongside major production cuts from larger competitors like Arcelor Mittal
Unfortunately, Schnitzer's earnings release offered no confirmation of fellow scrapper Nucor
While I wouldn't be clamoring for shares of domestic steelmakers at this stage, I nonetheless recommend that Fools keep watching these important bellwether companies very closely.
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Fool contributor Christopher Barker has a head as thick as a double-hulled steel tanker. He can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He owns no shares in the companies mentioned. The Motley Fool has a stainless disclosure policy.