More Industrial CEOs See End to ‘Really Challenging’ Demand Picture
Key Highlights
- Steel Dynamics expects better Q3 profits due to falling scrap costs, higher volumes and steady margins across steel and fabrication segments.
- Demand from sectors like data centers, energy, construction and automotive is supporting a positive outlook for steel and industrial manufacturing.
- Executives from various industrial firms acknowledge ongoing challenges like workforce shortages and tariff uncertainties but remain cautiously optimistic about future growth.
As investor updates go, Steel Dynamics Inc.’s Sept. 15 hit the bull’s eye.
Leaders of the Fort Wayne, Indiana-based company said third-quarter profits are setting up to be better than those from the spring and from last year’s Q3. Scrap raw material costs for Steel Dynamics’ steel operations have been falling faster than average prices and higher volumes combined with steady margins will help the company’s steel fabrication business put up better numbers, too.
Looking at the demand side, perhaps the most encouraging commentary from Chairman and CEO Mark Millett and his team was about breadth. Of course, they called out strong demand from data centers and some of the energy companies feeding the AI boom. But for steel operations, they also noted that commercial construction, automotive and broader industrial clients have been leading the way. And their comments on the steel fabrication group were even more confident.
“Demand has largely been supported by the commercial, data center, manufacturing, warehouse, and healthcare sectors,” the company’s statement said. “Further, the accelerated announcements for meaningful domestic manufacturing investment and onshoring, coupled with the U.S. infrastructure program, are expected to positively impact demand for not only steel joist and deck products, but also for flat rolled and long product steel.”
The Steel Dynamics team isn’t alone in being optimistic about what’s ahead despite continued sour readings from widely followed surveys such as the Institute for Supply Management’s Manufacturing PMI. Few public-company executives are jubilant about the state of the industrial sector but they’re also not in the dumps. Here is a sample of commentary from recent events hosted by investment banks that, for most executive teams, were the last public comments they’ll make before reporting third-quarter results.
- Ivo Jurek, CEO of global distributor Gates Industrial Corp., said the company’s diversified industrials business—which accounts for about a fifth of total revenues—has found firmer footing after “a couple of years of really challenging end-market conditions.”
“We believe that market has troughed and we anticipate that there may be some improvements as we go into 2026,” Jurek said at the Jefferies Industrials Conference in New York. - Surendralal Karsanbhai, president and CEO of Emerson Electric Co., told attendees of the JPMorgan U.S. All-Stars Conference in London that the macro picture remains very cloudy in terms of where in the world and in which sectors the automation giant is doing business. The perhaps-surprising standout market, he noted, is right at home.
“This has been a year characterized by geographies and verticals, some of strength that got stronger as the year went on and some of weakness that either stayed weak or got weaker as the year progressed,” he said. “Most notably, on the strength side: The United States started strong [and] got stronger as the year progressed.” - The executive team at Parker Hannifin Corp. is forecasting that the company’s in-plant industrial business will grow slightly this year. Jenny Parmentier, chairman and CEO, told the Morgan Stanley Laguna Conference that there are signs in the pipeline—albeit not across the board—that better days are ahead.
“We hear from our distributors some spots where they’re winning business and they’re seeing some […] demand,” Parmentier said. “You still hear about some project delays. But again, very positive on the amount of quoting activity.”
Not so positive is that two thorns in manufacturers’ sides show few signs of fading.
“We don’t hear much about interest rates—although that psychologically kind of helps the customer,” Reynal said. “We don’t hear much about the tax depreciation [or] acceleration. We just hear a lot about this level of certainty that they want to have with the tariff.”
The other persistent problem, one that predates tariffs by many years, is labor supply. As did Reynal, Otis Worldwide Corp. Chair, President and CEO Judith Marks said some projects are being delayed. But her reason is far more focused on talent.
“They’re not Otis project delays. Let me be clear: We have the mechanics,” Marks said. “We have the parts on site. But there are other trades that may not have as much staff as they need. And some of these projects, they’re already underway.”
In these respects, very little has changed from a year ago—and one could make a plausible argument that tariff policy and workforce concerns will remain concerns for years to come. What might be changing, though, is a demand environment that could help ease at least some of the anxiety around those two pain points.
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has been in business journalism since the mid-1990s and writes about public companies, markets and economic trends for Endeavor Business Media publications, focusing on IndustryWeek, FleetOwner, Oil & Gas Journal, T&D World and Healthcare Innovation. He also curates the twice-monthly Market Moves Strategy newsletter that showcases Endeavor stories on strategy, leadership and investment and contributes to other Market Moves newsletters.
With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati in 1997, initially covering retail and the courts before shifting to banking, insurance and investing. He later was managing editor and editor of the Nashville Business Journal before being named editor of the Nashville Post in early 2008. He led a team that helped grow the Post's online traffic more than fivefold before joining Endeavor in September 2021.