The US steel industry is banking on a $2,000 billion public infrastructure programme to save it from collapse.

American steelmakers, which employed about 125,000 people before last year's economic slump, are hoping that Barack Obama, who takes presidential office in less than three weeks, will rush through federal approval to fund a massive programme of road building, bridge, school and hospital construction projects and airport modernisation.

The US steel industry is under tremendous strain after both output and prices collapsed along with the world economy. According to the American Iron and Steel Institute, output halved between August and December, as growth economies such as China stopped spending and prices have halved in the past six months. Domestic demand also dried up as the property sector sought to limit the building of new homes and car manufacturers halted production.

The steel industry is the latest sector to buckle under the financial strain experienced by the world's largest economy. Almost everything that is manufactured in America needs steel in some form, from cars and appliances to office buildings. As Americans stopped spending on everything except essential items manufacturers have sought to slash production to keep pace with collapsing demand.

Mr Obama will have a full economic intray when he enters the White House on January 20. General Motors and Chrysler expect their short term federal loans to be replaced with long term aid, and the aviation industry is urging Mr Obama to ease foreign ownership restrictions on US airlines so that it can benefit from overseas capital. At the same time, the new Administration is under pressure to rush through a massive fiscal stimulus package, which will offer permanent tax cuts to Middle America to try to slow the US economy's decline. About 6.7 per cent of the American workforce is out of work, and many Wall Street economists believe that the US will be lucky if the unemployment rate peaks at 9 per cent.

One steel company chairman - Daniel DiMicco, of Nucor - said that he has urged Washington to launch a countrywide “Buy America” programme to help stimulate demand for US manufactured goods.

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