By Matt Day Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Steelmakers say a stubbornly slow recovery in the U.S. housing sector is holding them back. Robust recoveries by U.S. auto makers and oil and gas drillers, along with rising demand from emerging markets, have underpinned a rise in steel prices from recession-hit levels. But for U.S. steelmakers such as Nucor Corp. (NUE) and AK Steel Holding Corp. (AKS), the lagging residential construction sector has proved the weak link in the demand picture. "Construction spending is really the part of the economy that has lagged and kept us from making a full recovery," Ben Laaper, vice president of sourcing at Evanston, Ind., vehicle parts manufacturer Accuride Corp. (ACW), said at the Steel Success Strategies conference here. Steel sees only marginal uses in home construction, but a healthy residential property market lifts demand for steel appliances and typically spurs construction of shopping malls and office buildings, which use more steel. New residential developments also tend to lead to steel-heavy activity like road and bridge construction. Laaper said it takes about 13 truckloads of materials to build an average U.S. home, and the dearth of new construction has weighed on demand for trucks that use Accuride-made products. James Wainscott, chief executive of West Chester, Ohio-based AK Steel, said the weakness in residential construction was hampering the company's growth. The company in April reported first-quarter profit of $8.7 million, up from $1.9 million a year earlier, as higher selling prices made up for sales volume that came in short of expectations. Between 50% and 60% of U.S. steel demand comes from construction and related activities, said John Lichtenstein, managing director of metals at consultancy Accenture PLC (ACN). "There's no question construction is a significant driver of steel demand in the U.S. economy," he said. "The view is that the continuing crisis in the residential sector...will be with us for several years." U.S. housing starts, a government-tallied measure of new residential construction, remains at near-record lows even though the housing bubble burst about four years ago. Builders broke ground on a seasonally adjusted 560,000 new housing units in May, the last date for which data are available. That was well below the highs of more than two million starts a month reached in 2006, and down 42% from the same month in 2008. The housing sector's drag on growth isn't limited to the U.S., either, as some European companies continue to grapple with the fallout from the last decade's property boom and bust. The chief executive of ArcelorMittal (MT, MT.AE), the world's largest steelmaker, said demand in developed economies may not return to pre-crisis levels until 2015. "The global economy is still in a fragile state, particularly in the developed world," Lakshmi Mittal told attendees at the conference, which was hosted by American Metal Market and World Steel Dynamics. -By Matt Day, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com
