LONG PRODUCTS SUPPLY CHAIN SYMPOSIUM
ACTIONS FOR ECONOMIC RECOVERY
From the Steelmaker’s Perspective
Thomas A. Danjczek
President
Steel Manufacturers Association
May 10, 2010
Milwaukee, WI
Long Products Supply Chain Symposium
•SMA
•Set the Stage
-U.S. Steel Production
-SMA Long Product Data
-Global Steel Outlook
• Trade Issues
-China
-Scrap
-Raw Materials
• Environmental / Safety Washington, DC Issues
•Is Enough Being Done?
•What does the U.S. need to do?
•Conclusion
Outline
Long Products Supply Chain Symposium
SMA
• The Steel Manufacturers Association (SMA)
– 34 North American companies:
29 U.S., 3 Canadian, and 2 Mexican
– Operate 125 steel recycling plants in North America
– Electric Arc Furnace (EAF) steelmakers using recycled steel
– EAF steel producers accounted for nearly 2/3 of U.S. production in 2009
– SMA represents approximately 90 million of U.S. 120 million ton capacity
(75%)
– 128 Associate members - Suppliers of goods and services to the steel
industry
Long Products Supply Chain Symposium
Set the Stage
US Steel Production
(All in Million Net Tons)
(Numbers are Approximate)
PAST – From 1986 through 2008, U.S. steel production has been around 100 m tons – up &
down 10%
2009
1st Half
2nd Half
Year
25m
36m
63m
(45% utilization)
(62% utilization) Now 1.5m/week vs. 2.1m/week
(Minimills at 63% of production)
2010 (from November 2009)
World Steel
Peter Marcus
US Poll
78m
68m
69m
(up 19% over 2009), optimistic
(Back to 75m in 2012)
(up 10% over 2009)
2010 – Today (Through March 30)
Capacity Utilization (67.7%); or approximately 80 million tons annual rate
42.9% in 2009
Long Products Supply Chain Symposium
The Worldsteel Short Range Outlook
United States
Million MT
2009 (e)
2010(f)
Canada
Change
(%)
Million MT
2009 (e)
Mexico
2010(f)
Change
(%)
Million MT
2009 (e)
2010 (f)
Change
(%)
Crude Steel
Use
65.1
81.8
25.5%
Crude Steel
Use
10.6
13.1
23.9%
Crude Steel Use
17.7
22.1
24.5%
Finished
Steel Use
57.4
72.7
26.5%
Finished Steel
Use
9.5
11.8
23.9%
Finished Steel
Use
13.9
15.5
10.9%
Exports
8.5
11.3
32.9%
Exports
4.9
6.4
29.6%
Exports
2.0
2.4
20.0%
Imports
12.9
13.7
6.2%
Imports
6.0
7.7
28.3%
Imports
3.2
3.6
12.5%
Source: Worldsteel Economic Studies Committee, April 2010
Long Products Supply Chain Symposium
Global Steel Capacity Continues to Increase
World Crude Steel Capacity 2000-2012
World Crude Steel Capacity
CAGR
2,100
1,997
2,055
20
1,917
1,816
1,654
1,583
1,600
1,453
15
1,356
1,350
1,100
1,245
1,062
1,062
1,095
1,170
10
850
600
5
350
100
2000
Source: Worldsteel
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010(e)
2011(e)
2012(e)
0
Current Average Growth Rate (CAGR)
Steel Capacity (million metric tonnes)
1,850
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SMA Long Product Summary Data – (4/16/10)
Long Products Supply Chain Symposium
SIMA Import License Data Detail for March as published April 13, 2010:
PRODUCT
Rebar
TONS
40,147
Wire Rod
130,187
Merchant Bar
16,374
Light Shapes
6,129
Parallel Flange Sections
Structural Angles & Channels
All Other Structural Sections
Total Licenses
23,056
5,092
14,751
235,737
Long Products Supply Chain Symposium
Total Mill Shipments – 1st Quarter 2010
(Total Mill Shipments = Net Domestic Mill Shipments plus Exports;
Table in Short Tons)
Total – 1st Q 2010
(3 months)
YTD 2009
% Change
423,447
132,826
218.8%
1,446,113
1,342,481
7.7%
3. Wire Rod
693,357
427,271
62.3%
4. Merchant Bars
454,931
364,776
24.7%
5. Light Shapes
273,876
229,368
19.4%
6. Parallel Flange Sections
920,376
608,746
51.2%
7. Structural Angles & Channels
378,158
320,236
18.1%
8.
79,265
38,213
107.4%
Subtotal of Products 6, 7, and 8
1,377,800
967,195
42.5%
Total Shipments (excludes blooms & billets)
4,246,077
3,331,091
27.5%
Product Name
1. Bloom & Billets for Rerolling
2. Rebar
All Other Structural Shapes
Long Products Supply Chain Symposium
Red = Long Product Producer
Globalization and Consolidation Developments Have Dramatically
Changed the NAFTA Steel Landscape
Acquiring Company
Acquired Company
Arcelor Mittal
Arcelor
Dofasco
Mittal
Ispat Inland
ISG Bethlehem
LTV
US Steel Plate
Weirton
Acme-Riverdale
Georgetown
Sicartsa
Bayou
US Steel
Lone Star
National
LTV Tin
ISG IH#2 Pkl.
Stelco
BlueScope
IMSA Steelscape
Acquiring Company
Acquired Company
Nucor
Connecticut Steel
Trico
Birmingham
Corus Tuscaloosa
Worthington-Decatur
Marion
Nelson Steel
Harris Steel
Auburn Steel
North Star Arizona
American Iron Reduction
LMP Steel & Wire
The David J. Joseph Co. (Scrap)
Gerdau Ameristeel
Sheffield
Chaparral
Co-Steel
North Star
Sidetul Tultitlan
Quanex Macsteel
Corsa
SSAB
ICH/Grupo Simec
Republic
Ternium
Hylsa
IMSA
Ipsco Plate (U.S.)
Steel Dynamics
GalvPro-Jeffersonville
The Techs
Roanoke Steel
Steel of West Virginia
Omnisource (Scrap)
Acquiring Company
Acquired Company
Duferco/NLMK
Winner Steel
Evraz
Oregon Steel
Claymont Steel
Ipsco Canada
Severstal
Arcelor Mittal-Sp. Pt.
Rouge
WCI
Wheeling Pitt
CSN
Essar
Heartland
Algoma
Minnesota Steel
OAO TMK
Ipsco Tubular (U.S.)
Tenaris
Maverick Tube (U.S.)
Prudential Canada
Hydril Company
1/1/09
Long Products Supply Chain Symposium
China’s Trade Surplus with
the U.S.
Year
China’s Trade Surplus
2001
$22 billion
(year China joined WTO)
2006
$177 billion
2007
$262 billion
2008
$290 billon
2009
$196 billion
(up 47.7%)
The U.S. has lost 3.3 million manufacturing jobs since
2000… imbalances cannot go on forever.
Long Products Supply Chain Symposium
U.S. Scrap Consumption and Exports
90
80
70
Million Tons
60
50
Exports
U.S. Consumption
40
30
20
10
0
2000
2001
2002
2003
2004
2009 – Exports
Imports (e)
U.S. Consumption
2005
2006
22.3mt
3.0mt
48.0mt
2007
2008
2009
Long Products Supply Chain Symposium
RMDASTM Ferrous Scrap Price Index
Effective 4/20/10
Raw Material Export Restrictions are Continuing to
Disadvantage U.S. Steel Producers
• Many countries continue to impose a variety of
restrictions on exports of vital raw materials
–
–
–
–
Export prohibitions
Export duties
Export quotas
Other measures
• Trade-distorting restrictions on exports of raw materials
– Give domestic producers in the exporting country an unfair
advantage
– Increase worldwide costs of production
– Do not accord with the justifications given
– Place a heavy burden on steel industries in developing countries
that do not have substantial iron ore reserves or steel supplies
scrap
US Steel Industry, Then. . . . . . . . .and Now
Smoke pouring into the air from a Pittsburgh steel mill,
1890.
Electric Arc Furnace facility
Image by Corbis - Bettmann
Image by SMA.
Long Products Supply Chain Symposium
MILLIONS BTU/TON
U.S. Steel Industry – Energy / TON
50
40
B.F BURDEN PREPARATION
BOF STEELMAKING
MINIMILLS
30
CONTINUOUS CASTING
20
EAF/ THIN SLAB CASTING
10
0
Source: Dr.
John Stubbles
1950
1960
1970
1980
1990
2000
2010
Long Products Supply Chain Symposium
EAF Steelmaking is Energy Efficient
Long Products Supply Chain Symposium
BOF
EAF
MILLIONS TONS C (AS CO2)
250
200
GLOBAL C ( FOSSIL FUELS ) ~ 8 BILLION TONS
U.S. C ( FOSSIL FUELS )
~ 2 BILLION TONS
U.S. STEEL INDUSTRY
~ .034 BILLION TONS
U.S.EAF'S
~ .011 BILLION TONS
150
100
50
0
CHINA
E.U.
JAPAN
U.S.
Long Products Supply Chain Symposium
SMA Climate Change Policy – Federal
Legislation Needs to Address the Following:
1.
Reward Recycling
2.
Recognize Steel Industry Improvement Limitations
3.
Include Global Participation and Monitoring with No Exemptions
Available for Any Nation
4.
Prevent Double Counting of Carbon Costs
5.
Promote GHG Emissions Reductions From Efficiency and
Technology Improvements and Not Demand Destruction of North
American Steel Production
6.
Preempt Competing State Carbon Regulation Policies with a Single
Federal GHG Policy, to Ensure a Level Playing Field within the U.S.
7.
Avoid Unintended Consequences
Long Products Supply Chain Symposium
Is Enough Being Done?
Raw Materials
No
Barriers continue
Energy
No
China
No
Lack of policy
continues
Currency manipulation,
Subsidies, Not playing by
the rules
Trade
No
Distortions continue,
Who’s the protectionist
No long term structural policy changes are being proposed in
Washington for taxes, trade imbalance, and energy.
Long Products Supply Chain Symposium
What does the US need to do?
• Assume a Pro-Manufacturing Agenda
–
–
–
–
–
–
Business Tax Reform
Border Adjustable Taxes
Currency Adjustments
Energy Independence
Reasonable regulatory measures (Environment/Labor)
Climate for investments (Jobs, Jobs, Jobs) and Infrastructure
• Solve the structural problems that caused the recessionReal Foundation
– Bad loans and securities on bank balance sheets
– Reduce huge trade deficits
• Policy incrementalism is not sufficient
Long Products Supply Chain Symposium
Conclusion
The decline in U.S. Manufacturing has been so severe, policy
incrementalism is not sufficient.
U.S. Steel Industry in Better Position Today to Manage the Down Cycle
(but what a down cycle!)
― Improved Economics From Consolidations, i.e. “Reacted Quicker”;
― Improved Control of Variable Costs
― Scrap-Based Metallics (In 2009, U.S. will be nearly 2/3 EAF-based
― Energy Costs
― Transportation Costs
― Labor Efficiency (U.S. at Below 2MH/Ton; Minimills Often Below 1MH/Ton)
― Improved Inventory Control (Inbound Materials, Steel, and Customer
Products). NOT THE OLD INVENTORY OVERHANG!
― Concerns with Scrap, Climate Change, Energy, U.S. Debt, Taxes,
Currency, but especially Climate for Investment
― Still Challenging – But Reasons for Meaningful Long-Term Optimism!