Just as U.S. steel companies' victory party -- for surviving the 1990-1994 industrial recession -- was getting good, somebody appears to have turned down the music.
Less than two years into a recovery and less than three months after steel executives had met with stockholders to predict continued strong increases in sales and prices, customers have started reducing orders and scoffing at price rise notices.
Now, sooner than almost anybody expected, the steel industry, with 8,200 workers in Maryland, is about to find out whether years of downsizing and restructuring has tempered it against the traditional boom-and-bust pattern.
This year "may not be quite as good as 1994," conceded Curtis "Hank" Barnette, chairman of Bethlehem Steel Corp.
"But," the head of Maryland's biggest steelmaker, with 5,400 employees at Sparrows Point, added, "it will still be a very good year."
Mr. Barnette expects increases in exported steel will make up for downturns in domestic orders so that the Bethlehem, Pa.-based steelmaker will end up shipping about 9.3 million tons, the same amount as last year.
Even with flat sales, the company is expected to report higher profits -- most analysts predict the company will earn as much as $560 million this year, seven times last year's net profits -- since unusual repairs that have now been completed cut 1994's margins.
Even if sales drop, Bethlehem still won't return to its historical pattern of declaring huge losses and laying off thousands of workers, he said.
The reason? Bethlehem and other steel companies have already made the painful cuts -- reducing manpower, slashing costs and purging money-losing divisions -- to protect themselves during downturns.
"Our competitiveness makes for a much smoother cycle," Mr. Barnette said.
Not everyone is so optimistic, however.
Like a growing number of steel analysts, John Tumazos, who follows the industry for Donaldson Lufkin & Jenrette in New York, has started re-evaluating his profit expectations for steel companies because of reductions in orders from automakers and a general economic slowdown.
"The ride was not as good as expected," he said. "It has been brief."
Mr. Tumazos is hopeful the companies will pull off their much-promised steady growth despite the disappointing sales.
But, he said, because Nucor Corp., one of the largest "minimill" companies, has cut its steel prices four times this year by a total of $40 a ton, other steelmakers may have to cut their prices and profit margins to maintain sales.
"It is entirely possible the large steel companies could be in the red" again in a few months, he warned.
These doubts are a far cry from what nearly everyone in the industry was expecting just three months ago, when 1995 showed all the signs of matching or perhaps even topping 1994, the best year for the industry since the late 1970s.
Signs of optimism were everywhere: steel-hungry customers were agreeing to price increases, steelmakers were hiring for the first time in a decade, and steel company insiders were buying up shares.
Henry A. Lowry, owner of Seaboard Steel and Iron Corp. in Baltimore, said business this winter was among the best he'd seen in his more than 40 years in the steel industry.
"It was not as good as the 1973-74 peak, but it was very good," he said.
Then, in April, orders to his service center started to slip a little. Nationwide, orders fell 6 percent from the previous month.
Jim Ripken, general manager of the 150-worker Thompson Steel Co. operation in Dundalk, said he noticed the downturn because after months of swallowing price increases, his customers -- mostly manufacturers of auto parts and household items -- started demanding -- and sometimes getting -- discounts.
Now, his sales are about 5 to 7 percent below levels set early this year, and Mr. Ripken laughs when he gets notices of price increases from the steelmakers who supply him.
"I just got a notice, and I called the guy and said 'Are you guys on a different planet than I am?' "
But Mr. Ripken, who has worked in the steel industry for more than 20 years, said that although he thinks the current steel boom is over, this time a bust may not follow because he and other steel managers have learned from past cycles.
For example, he has carefully slowed his orders of raw steel so that he can maintain steady inventories -- thus avoiding the old feast-or-famine pattern.
And the big steelmakers won't suffer as much as in the past because they have vastly improved their operations, he believes.
As recently as two years ago, Mr. Thompson considered himself lucky if half of his orders of steel arrived at his plant on time. Today, he said, more than four out of five of his shipments from domestic producers are on time.
"They are so much more efficient. They are much better able to take downturns than they were," he said.
Many others see hopeful signs as well.
Benjamin R. Civiletti, a prominent Baltimore attorney and member of Bethlehem Steel's board of directors, said he bought about 1,000 shares of Bethlehem Steel stock two months ago because he saw evidence that the company -- which lost a total of $1.7 billion on its operations from 1990 to 1993 -- had finally settled into a steadily profitable path.
The nation's second-largest steelmaker earned $80 million in 1994, and $52.5 million in the first three months of 1995.
Mr. Civiletti figured that, sometime over the next three years, Bethlehem's sales would probably fall off from this winter's torrid pace, but he nevertheless thought the company would still "maintain some growth. . . . I have great confidence in Bethlehem Steel to sustain profitability."
And Charles Bradford, a steel analyst for UBS Securities in New York, said he believes American steel companies are in good shape because their labor costs -- thanks to a falling dollar and years of stagnant wages -- are now below those of overseas competitors.
That means domestic steelmakers can underprice imported steel in the U.S. market, and make up for any downturn at home by exporting profitably, he said.