Ironclad Recovery For Middlemen? Upturn seems real, but question is whether gains off depressed levels will stick.(INDUSTRY SNAPSHOT)(METAL PROCESSING AND FABRICATION)

Byline: KIRK SHINKLE

Steel prices are rising, and the economy's improving. That means the processing and fabrication industry is starting to see the benefits.

It's been a rough three years for most in the sector. During the recession, demand slackened, prices stayed low and turning a profit was an ongoing battle. The companies that turn giant sheets of raw metal into more workable forms during early stages of production found themselves without much work as manufacturing tanked.

"The industry has been significantly impacted by weaker capital goods demand, weaker construction activity and, at least in the last 12 months, some weakening in the automotive market," McDonald Investments Inc. analyst Mark Parr said.

"The companies also found themselves in a significantly overinventoried position in January 2003, which put pressure on operations through the first half."

But a recovery in durable goods orders -- they rose 3.3% in October after a revised 2.1% gain in September -- bodes well for the sector.

In the second half, stocks in the group have clawed their way back to pre-recession levels, thanks to a recovery in metals and the general economy.