CISA: China Iron and
Steel Association
Metallurgical Council of CCPIT
(MC-CCPIT)
11th International Steel Market
and Trade Conference
Thomas A. Danjczek
President
Steel Manufacturers Association
March 29, 2013
Guangzhou, China
Update 3-6-13
11th International Steel Market
and Trade Conference
•About the SMA
•Set the Tone - Economy
•Set the Tone - Steel
•US Steel Imports
•Expanding Future US Steel Production
•Final Thoughts
Outline
11th International Steel Market
and Trade Conference
SMA
About the SMA
- Composed of 35 North American electric arc furnace (“EAF”) steel producing
Member Companies, and 118 Associate Member steel industry suppliers
- SMA Members account for approximately 75% of U.S. domestic steel capacity
- Today, roughly two-thirds of North American steel production comes from
the scrap-based EAF process, up from just 10% in the early 1970s
U.S. EAF Share of Total Production
65.0%
60.0%
55.0%
50.0%
45.0%
40.0%
35.0%
Approximately 2/3 of U.S. Steel Production
30.0%
25.0%
20.0%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
% of EAF Production
11th International Steel Market
and Trade Conference
Set the Tone - Economy
•
The US “fiscal cliff“ poses the most immediate risk to the US
economy
•
Pace of US growth in 2013 estimated at 2%, near
stagnation
•
While US unemployment rate declined, still above prerecession levels
•
Rising energy production and housing rebounding are
bright spots (“race to gas”)
•
Capital spending is a downside risk
•
US trade deficit is unsustainable
11th International Steel Market
and Trade Conference
Total US Trade Deficit with China
(in million US$)
350,000.00
300,000.00
Million US $
250,000.00
200,000.00
150,000.00
100,000.00
50,000.00
0.00
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: US Census Bureau
2012 US trade deficit with China was a record $315.1 billion, accounting for 43.3% of overall $727.9
billion US trade deficit.
2012 US steel imports from China were 1,505,751 metric tons, a 33.9% increase over 2011 levels, and a
92.8% increase over 2010 levels.
11th International Steel Market
and Trade Conference
Set the Tone - Economy
UNSUSTAINABLE
US GOOds
Annual Deficit is the most significant
barrier to U.S. economic recovery
11th International Steel Market
and Trade Conference
Set the Tone - Steel
•
Primary metal 4% growth YTD 2012 over 2011 in US
•
U.S. capacity utilization approx. 74.4% in 2012
Y.T.D. capacity utilization approx.76.9% (w/reduced capacity)
•
Scrap price volatility (75% of minimill costs)
Year
World Steel Production
US Steel Production
US Steel Imports
(million metric tonnes)
(million metric tonnes)
(million metric tonnes)
2007
1,347.0
98.1
30.2
2008
1,341.2
91.4
29.0
2009
1,235.8
58.2
14.7
2010
1,428.7
80.5
21.7
2011
1,490.1
86.2
25.9
2012
1,517.9
88.6
30.4
Sources: census.gov, worldsteel.org
11th International Steel Market
and Trade Conference
2012 Steel Shipments by
Market Classification
11th International Steel Market
and Trade Conference
NAFTA Auto Production
18
16
14
Units (millions)
12
10
8
6
4
2
0
13
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
Source: Wards Automotive
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and Trade Conference
Construction Activity
*Non-building structures (e.g., infrastructure) not included
2,500,000
Residential (1 & 2 family dwellings)
Non-Residential
Square Footage (000)
2,000,000
1,500,000
1,000,000
500,000
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: McGraw-Hill (Dodge)
11th International Steel Market
and Trade Conference
Energy Production
2,500
$12.0
Total RIGS
Verticle RIGS
Horizontal RIGS
2,000
$10.0
Natural Gas Price at Wellhead
$8.0
$6.0
$ Mcf
RIG COUNT
1,500
1,000
$4.0
500
$2.0
2008
2009
2010
2011
Jul
Apr
Jan
OCT
JUL
APR
JAN
OCT
JUL
APR
JAN
OCT
JUL
APR
JAN
OCT
JUL
APR
JAN
0
$0.0
2012
Source: Baker Hughes, U.S. Dept. of Energy
11th International Steel Market
and Trade Conference
Demand Forecast
Finished Steel (mmt)
2011
2012
∆ YOY
2013
∆ YOY
Industry Shipments
83.3
88.5
+6%
92.1
+4%
Finished Imports
19.8
22.7
+15%
22.9
1%
Adjustments
1.8
2.0
Exports
12.2
12.8
+5%
12.9
+0%
Apparent Steel Use
89.1
96.5
+8%
100.0
+4%
Inventory Change
0.6
1.1
Real Steel Use
88.5
95.4
(ASU)*
(RSU)**
2.2
0.9
+8%
99.1
+4%
Source: AISI
11th International Steel Market
and Trade Conference
US Steel Imports
US Imports of Total Steel Products Up 17%
40,000,000
Total Steel Imports (2011 vs 2012)
33,474,583
Imports (Net Tons)
35,000,000
30,000,000
28,515,276
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2011
2012
Source: U.S. Department of Commerce (Census Bureau)
11th International Steel Market
and Trade Conference
US Steel Imports
Comparing 2012 to 2011 by product category:
•
Semi-finished imports increased 14.2% to 6,772,056 metric tons;
•
Flat product imports increased 16.4% to 9,550,032 metric tons;
•
Pipe and tube imports increased 24.4% to 7,710,529 metric tons;
•
Long product imports increased 14.6% to 5,191,504 metric tons;
•
and stainless imports increased 13.5% to 1,143,515 metric tons.
11th International Steel Market
and Trade Conference
US Steel Imports
Increase in Total Steel Imports is from
Numerous Countries, Across the Globe
2011 vs. 2012 Total Steel Imports
from Key Offshore Countries
Imports (NT)
5,000,000
4,000,000
+27%
+30%
+74%
3,000,000
2,000,000
+30%
+34%
+84%
+24%
1,000,000
0
Turkey
Germany
China
2011
Russia
Japan
South Korea
Brazil
2012
Source: U.S. Department of Commerce (Census Bureau)
11th International Steel Market
and Trade Conference
US Steel Imports
Imports (NT)
Surge in Steel Imports is Across
Various Product Lines
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2011 vs. 2012 Increases in Major Products
+25%
+41%
+37%
+19%
+49%
Rebar
Cut-to-Length
Plate
2011
Corrosion
Resistant Steel
Line Pipe
Oil Country
Tubular Goods
2012
Source: U.S. Department of Commerce (Census Bureau)
11th International Steel Market
and Trade Conference
US Steel Imports
Factors in the Surge of Steel Imports
• Weakened global economy
– Asian market downturn, large overcapacity of steel
– European recession
– U.S. market still weak
• Market interference by foreign governments:
– Subsidies
– Raw material export restrictions
– Import restrictions on steel or steel containing products
– Other interventions
11th International Steel Market
and Trade Conference
Expanding Future US Steel Production
The United States is unique among major steel
producing nations:
• The US is a net importer of steel, yet domestic capacity is
utilization only at appox 75%
• The US is the world’s largest exporter of scrap
• The US is a low cost steel producer
Expanding US Steel Production
Comparative Advantages in US
The United States:
• Is self-sufficient in steelmaking raw materials, especially scrap (2011
– generated 84mmt of scrap, but consumed only 55mmt)
(~ 75%of production costs)
• Since 2002, imports 26.2% of steel consumption, while capacity
utilization only appox 80%
• Has relatively low energy prices
• Has high productivity to offset wage rates
• Has the world’s largest capital market
Expanding Future US Steel
Production
Conclusions
• Need policies that encourage expanded domestic steel
production to utilize domestic capacity
• Foreign export restrictions on steel scrap have many negative
consequences
• Expanding US steel production through the conversion of
scrap into steel would create high-paying jobs, increase GDP,
reduce the trade deficit, and provide added tax revenues
• The expansion must occur without massive government
investments, subsidies, and interventions; but needs to be
based on comparative economics and market forces
• Significant amounts of imports should be replaced with
domestically produced steel
11th International Steel Market
and Trade Conference
• Volatile and fragile times continue
• U.S. is in a traffic jam, moving slightly
forward, but don’t know other
consequences. Gridlock continues
• Uncertainty will continue.
• Increasing steel capacity without regard to
market forces or comparative advantage is
wrong
• Reasons for optimism in steel in North
America:
– Favorable gains with reemerging manufacturing
base, including benefits of shale gas
– Scrap-based, 75% of cost – local supply
– Low cost on global basis (energy is positive, labor
less than 10%, others have higher transportation
costs)
– Relatively strong market and resiliency
– Better & stronger company balance sheets
Final Thoughts