Steel Industry Update/154
March 2001
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In today’s global economy, markets can rapidly
change direction. While current steel pricing and
production conditions are among the worst in recent memory there is some hope that things
could start to improve by mid-2001. In fact, Peter
Marcus of World Steel Dynamics is now predicting that the “death spiral” of steel prices has hit
rock bottom and that there is a positive shift underway in U.S. and global steel markets.
Marcus recently wrote that 2001 could be a mirror image of 2000. The first half of 2000 saw
strong pricing and increased shipments for U.S.
steel producers while the second half witnessed a
dramatic downturn. On the global front, in the
first three quarters of 2000 world steel production
surged. Approximately 854 million metric tonnes
of steel were produced on an annual basis during
this period, which represents a 15% increase
over the annual rate during the first quarter of
1999. While global consumption rose an estimated 4.7% over this same period, it was clearly
not enough to offset the massive growth in production. Moreover, during the second half of
2000 steel buyers started liquidating inventories,
compounding the supply-demand imbalance and
driving prices to the floor.
However, despite projections for an adverse
start, 2001 already shows some signs of improvement. For the world market, there are three
main reasons for a more positive outlook: (1) anticipated lower global steel production, (2) stable
steel demand, and (3) the end of inventory liquidations by steel users. For the U.S., this world
outlook is coupled with favorable predictions on a
substantial drop in imports, especially HR band.
Inside This Issue......
Fourth Quarter Results ..............................
Trade Crisis ................................................
Prices and Shipments ................................
Raw Materials ............................................
Labor/Management ....................................
Capacity/Technology .................................
Worthy of Note ...........................................
1
2
4
5
5
7
7
With supply and demand becoming more balanced by mid-year, world and domestic steel
prices will slowly but surely move up.
Where are prices headed? According to World
Steel Dynamics, world export prices for slab may
rise as much as $45 per metric tonne by the third
quarter, up from $160 in December, and hotrolled band could rise to $275 per tonne from
$175 over the same period (F.O.B. the port of
export). Cold rolled and galvanized are also
forecasted to rise from their lows of $290 and
$360 per tonne to $380 and $475 per tonne respectively by the third quarter of this year. Of
course, a lot depends on what happens to the
rest of the economy, especially major steel consuming industries like auto, construction and
heavy equipment. But assuming end-use markets hold up, a slow and painful recovery is in the
works.
FOURTH QUARTER RESULTS
Performance during the fourth quarter of 2000 reflected the depression battering the North American steel industry. Weaker prices led to dramati-
Table 1: Selected U.S. Steel Industry Data, December & Year-To-Date
(thousand tons)
Month of December
Year-to-Date
2000
1999
% Chg
2000
1999
% Chg
Raw Steel Production ..................
Capacity Utilization ....................
Mill Shipments ..............................
Exports .........................................
Imports .........................................
Apparent Steel Supply* ................
Imports as % of Supply*.............
Iron Ore Shipments (metric) ...........
Average Spot Price** ($/ton) .........
Scrap Price+ ($/gross ton) ..............
4.2%
-3.2%
20.3%
6.2%
3.6%
-3.1%
1.7%
0.1%
7,982
72.0
7,559
472
2,361
8,909
20.5%
5,052
323
93
9,604
88.5
9,159
520
3,102
10,931
21.0%
6,046
349
149
-16.9%
--17.5%
-9.1%
-23.0%
-18.5%
--16.4%
-7.7%
-37.6%
111,903
85.9
109,624
6,529
37,957
132,495
22.2%
59,682
349
115
107,395
83.8
106,201
5,426
35,731
127,925
21.2%
57,871
343
115
Source: AISI, Purchasing Mag., & US Geo. Survey *Excludes semi-finished imports **Avg price of 8 carbon products +auto bundles
Steel Industry Update/154
cally reduced shipments and falling sales for all
companies tracked by Locker Associates, with
U.S. integrated mills suffering the most dramatic
downturn.
The six U.S. integrated producers realized operating loses of $389 million for the fourth quarter
compared with gains of $28 million over the same
period last year (see Table 2). (Unfortunately,
both LTV and Wheeling-Pitt had to be excluded
from our review do to late reporting.) Shipments
for U.S. integrated mills declined 12%, dropping
from 9.7 million tons to 8.6 million tons, while
sales went down 10%. In addition, with production volume falling, average costs per ton rose
almost 12%. With all these negative trends, every U.S. integrated mill lost money except AK Steel
-- but even their profits fell nearly 50%. (Note: US
Steel’s numbers now include their Kosice mill in
the Slovak Republic.)
Previously faring better than most U.S. integrated producers, the three Canadian integrated
mills reported fourth quarter losses as well as falling shipments and sales across the board. Only
Dofasco reported a positive operating income.
While Canadian shipments dropped only half as
much as the U.S., they reported a more dramatic
downturn in sales of 13% and nearly an 8% drop
in prices.
While the six U.S. minimills in Table 2 also
showed significant signs of slippage, all but two
(Birmingham Steel and Co-Steel) managed to
generate a positive operating income for the
fourth quarter. Operating costs for the minimills
remained fairly constant despite a nearly 10%
drop in sales and a 6% reduction in shipments.
Average prices fell nearly 3.5% but producers
were still able to hold their ground. Excluding Ipsco, which includes major fabricating operations,
all six minimills reported a decline in shipments
for the fourth quarter.
TRADE CRISIS
Imports Reached Record Levels in 2000: Figures released by the Census Department showed
steel imports in 2000 at 38 million net tons, up 2.2
million net tons, or 6%, from 1999. Semifinished
imports topped 9 million tons, a new all-time record. The biggest increases were in HR sheets,
OCTG, and heavy structural shapes, while the
largest decreases were in CR sheets and hotdipped galvanized sheets and strip. The countries registering the biggest increases in shipments to the U.S. were Ukraine, China, and India,
while Japan, Korea, and Mexico registered the
greatest declines.
Preliminary figures for January showed steel
imports at 2.24 million net tons, virtually the same
as the 2.23 million the month before, but down
830,000 tons, or 27%, from the 3.07 million net
ton figure for January of last year. Semifinised
products went down 62% from January 2000,
while finished products were off 12%. HR sheet
dropped 34% from last year, but CR was up a
whopping 56%. Plate, wire rode and HR bar all
went down, while heavy structurals, rebar and
OCTG products went up (AMM 2/1, 2/12, 2/26; U.S.
Customs Service).
AK Leads Charge Against Bailouts: In the face
of calls for action to protect domestic steel from
the rising tide of bankruptcies and layoffs, AK
Steel has emerged as the leading force opposing
such moves. In January, citing “philosophical differences” with the American Iron and Steel Institute and a majority of its members, it withdrew
from that organization. AK had opposed AISI actions supporting trade cases against the dumping
of foreign imports and had registered its disagreement with the law sponsored by Sen. Robert
Byrd (D.-W.Va.) that provides federal aid to troubled steel mills. Last month, it came out in opposition to the plan of Ohio Republican Gov. Bob
Taft to grant $110 million to aid troubled companies in the state. The Taft plan would provide
$30 million for ailing steelmakers to expand or restructure operations, $60 million in tax-exempt
bonding authority to finance pollution control
equipment, $15 million to help upgrade employee
skills, and $5 million for infrastructure improvement and new equipment.
AK, on the other hand, has touted its role as a
model of success for the industry. Recently, Rep.
John Boehner (R.-Ohio) sent a letter to President
Bush urging him to tour the company’s Middletown facility to see “a profitable and efficient
steel producer” that has operated “without any
government intervention.” Its government
“hands-off” policy has received partial support
from the Steel Manufacturers Association, representing most of the major minimills. A statement
from SMA’s Board of Directors last month, while
backing further relief actions by the government
to stem low-cost imports, opposed “any bailout of
non-competitive facilities and reduction of their
legacy costs.” Its “survival of the fittest” position
(government’s support of troubled companies “violates the laws of evolution,” in the words of one
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available by subscription by calling 800-247-8080. Locker Associates, 225 Bdwy, # 2625, NY NY 10007. E-Mail: lockerassociates@yahoo.com
-2-
Steel Industry Update/154
Table 2: Performance of Major North American Steel Producers, 4Q00 & 4Q99
U.S Integrated
AK Steel ...........
Bethlehem ........
National ............
Rouge Steel .....
USSteel ............
Weirton.............
U.S. Totals .......
Shipments
Sales
Oper Income
Sales/Ton
(thousand tons)
($ millions)
($ millions)
($ per ton)
4Q00
1,595
1,877
1,434
566
2,632
471
8,575
4Q00
$46
(116)
(76)
(71)
(122)
(50)
$(389)
4Q99
$94
(35)
3
(44)
48
(39)
$28
4Q00
$649
482
454
408
459
446
$495
4Q99
$683
482
466
417
418
436
$485
4Q00
$29
(62)
(53)
(125)
(46)
(106)
$(45)
4Q99
$59
(16)
2
(60)
17
(59)
$3
Canadian Integrated (C$=US$.66)
Algoma .............
437
495
$228
$266
Dofasco ............
1,121
1,109
759
801
Stelco ...............
1,106
1,225
612
771
Canada Totals .
2,664
2,829 C$1,599 C$1,838
$(11)
20
(62)
C$(52)
$9
105
30
C$144
$521
677
553
C$600
$537
722
629
C$650
$(24)
18
(56)
C$(20)
$18
95
24
C$51
$(6)
(1)
18
120
2
15
$147
$3
17
31
147
6
27
$232
$264
293
414
409
402
333
$372
$279
304
447
417
453
345
$386
$(10)
(2)
32
49
4
32
$29
$5
25
61
56
15
54
$43
607
673
515
2,619
413
510
5,337
4Q00
$1,035
905
652
231
1,208
210
$4,241
($ per ton)
4Q99
$1,092
1,058
786
306
1,198
290
$4,728
N.A. Minimills (US$)
Birmingham ......
562
Co-Steel ...........
574
Ipsco* ...............
560
Nucor* ..............
2,471
Oregon .............
381
Steel Dynamics
457
N.A Mini Totals
5,004
4Q99
1,599
2,196
1,686
734
2,865
665
9,745
Oper Inc/Ton
$149
168
232
1,010
153
152
$1,864
$170
204
231
1,092
187
176
$2,059
Source: Company documents. Note: Steel Segment, except Ipsco & Nucor. Includes profit-sharing; excludes non-recurring charges.
AK backer) is in direct contradiction to the position of the United Steelworkers of America, which
is calling for a $10 billion loan guarantee program
and a 2% surcharge on all steel consumed to pay
for legacy costs like retiree insurance benefits.
And straddling these positions, the American Iron
and Steel Institute, representing most of the
country’s integrated producers, in a statement
last month that reflected the industry split, strongly supported immediate quota restrictions and
other restraints on foreign imports, but avoided
entirely the issue of government bailouts for
struggling facilities (AMM 2/12, 2/13, 2/19, Yahoo Mail
gency round of multilateral steel negotiations with
the World Trade Organization and non-WTO trading partners to restrain imports. A few weeks letter, the Senator, in a handwritten letter he delivered personally to Vice President Cheney, repeated his request for an emergency national
steel summit.
While supporting Rockefeller’s call for a national summit, Tom Danjczek, president of the Steel
Manufacturers Association, representing minimills
in the U.S., expressed caution that such a confab
should not be a cover for a government bailout of
the industry. “If this could support the industrywide call for trade limitations, we would be very
encouraged,” he said. So far, however, the Bush
administration has not responded to either of
Rockefeller’s initiatives.
2/23, AK Press Release 2/15).
Nucor also came forward last month with their
position on bailouts. Bob Jones, the company’s
director of marketing, told a steel conference that
the industry needed to be consolidated and that
some obsolete facilities should be closed. He
was critical of the $1 billion loan guarantee program under the measure passed by Congress
last year and sponsored by Sen. Robert Byrd (D.W.Va.), “Nucor is not supportive of bailout loans
and guarantees,” said Johns (AMM 2/21).
Meanwhile, several trade bills were introduced
into Congress in February. Rep. Ralph Regula
(R.-Ohio), former chairman of the Congressional
Steel Caucus, reintroduced his bill to make it easier to reach a positive injury finding under Section
201 of the Trade Act of 1974. The bill would
amend the section to hold that imports shall be
considered a serious injury or threat of injury “if a
causal link is established between imports and injury to domestic industry.” At present, imports
have to be a “substantial” cause of injury, a barrier that has often prevented the domestic industry
from gaining import restrictions. Regula’s bill was
introduced in the last Congress but never came
to a vote (AMM 2/1, 2/12, 2/26).
Rockefeller Pushes 201 Action: West Virginia
Sen. Jay Rockefeller (D.) has continued to prod
the new Bush administration to undertake some
measures to help the industry. A Jan. 29 letter
from Rockefeller urged the President to immediately call for a 201 review by the U.S. International Trade Commission, convene an Emergency National Summit on Steel, and begin an emer-3-
Steel Industry Update/154
More Casualties File for Bankruptcy: Three
more steel mills joined the growing casualty list
last month. On Feb. 7, GS Industries filed for
Chapter 11 bankruptcy and immediately announced that it was permanently shutting down
its wire rod operation in Kansas City, Mo. The
company was formed six years ago with the merger of GS Technologies of Kansas City and
Georgetown Industries of Charlotte, NC. The
company blamed weaker demand for wire rod in
the face of higher electricity and gas costs, and
claimed that the tide of imports last year played
only a small part in its problems. GS was one of
eight U.S. wire producers and two unions that
filed an action against imports under Section 201
in 1998. The move finally led President Clinton to
impose a three-year tariff quota on most wire rod
imports a year later, but at a level that most in the
industry regarded as too high and with a tariff
level they felt was too low to be effective.
Early last month, CSC asked the bankruptcy
court for permission to shut down its Warren,
Ohio, mill if a buyer could not be found. The
company, which manufactures specialty steel
bars, filed for Chapter 11 bankruptcy Jan. 12. Its
debts at the time registered $259 million against
$219 million in assets. Randy Lachowski, CSC’s
president and CEO, said that the company did
not have enough cash to continue even on a limited operational basis after the court-approved
budget expired Feb. 9 (AMM 2/2).
Finally, Qualitech, which had already emerged
from one bout with Chapter 11 two years ago,
decided to close its SBQ mill in Pittsboro, Ind., rather than seek another round with the bankruptcy
courts. Qualitech’s president, Robert D. Bosar,
said that an investment bank would be retained to
find a customer for the $350 million minimill,
which employed only 125 of its original 325 workers. A second Qualitech plant, built to produce
iron carbide in Corpus Christi, Tex., has not been
able to find a buyer and will reportedly be bulldozed and sold for scrap (AMM 2/7, 2/8, 2/12).
1.8%, carbon tubing was higher by 1.5%, and
carbon bars were up by 1.3% (AMM 2/9).
PRICES AND SHIPMENTS
Sheet: Mixed signals emerged from sheet producers last month, though the news was generally positive. Amid signs that the HR market may
be recovering both integrated and minimill producers announced sizeable price increases. Anticipating a strengthening market, Ispat in late
January attempted a price rise on HR sheet of
$40/ton, and CR and galvanized of $30/ton, all
beginning with March 1 shipments. The move
was joined by US Steel, Bethlehem, LTV, Stelco
and Wheeling-Pittsburgh. However, in a move
clearly undercutting its rivals, Nucor a week later,
announced a price hike of only $20/ton for HR
alone, effective with April 1 shipments. By the
end of February, buyer resistance on the West
Coast seemed to forestall any immediate hikes in
that region. The word there was that increases
may be in the offing later, but not now. Prices for
HR sheet in February were around $220/ton with
CR and coated sheet at about $330/ton and
$350/ton respectively (AMM 1/29, 2/6, 2/26).
Stainless Plate: Prices for stainless coiled plate
have dropped since the beginning of the year by
5.1%, according to plate dealers. The decline,
they say is primarily due to the sharp increase in
prices that came during the first ten months of
last year -- up 23%. During January and February of this year, coiled plate grade 316 and 316L
both fell to $1825/ton, from levels of $1950 for
grade 316, a drop of 6.4%, and $1935 for grade
316L, a decline of 5.6%. Grade 304 coiled plate
went from $1320 to $1270/ton, down 3.8%, and
grade 304L dropped from $1395 to $1340/ton, a
dip of 3.9%. Uncoiled plate also slid, but not so
sharply. Grade 316 uncoiled went from $2240 at
the end of last year to $2180/ton, down 2.7%,
grade 316L was off by 1.8% from $2220 to
$2180/ton, grade 304 declined from $1740 to
$1720/ton, down 1.l%, and grade 309 went from
$3500 to $3435/ton, off by 1.9% (AMM 1/29).
Service Centers Report Inventories Melting: A
possible pickup in the industry was reported last
month; inventories at steel service centers were
dropping steadily, indicating they may be ready to
place new orders. In December, inventories
reached the lowest levels for the entire year, registering the fourth consecutive monthly decline.
Service centers shipped 29.6 million tons of steel
last year, just a bit more than the 29.4 million tons
shipped in 1999 and just a bit short of the record
of 29.8 million tons in 1998. Greatest gains were
in alloy products, increasing by 10.4% over 1999.
Stainless steel shipments from service centers in
2000 were up by 3%, carbon plate increased by
Wire Rod: Government sources at the beginning
of February confirmed that all future imports of
wire rod for the 12 months that ended Feb. 28
would be subject to a 10% tariff since import quota levels had been filled. Under Section 201,
three-year quota restrictions were placed on wire
rod imports beginning March 1, 2000, limiting
them to 1.58 million tons the first year, and an increase of 2% each year in the second and third
years. Some importers were reported to be holding their goods in storage for the month of Febru-4-
Steel Industry Update/154
fining it as just “a working group” to explore the
possibilities, SMA President Thomas Danjczek
said the committee would consist of six or seven
members of the organization. He also acknowledged that there could be some significant legal
issues in launching such a venture under the
auspices of a trade association. However, SMA
is interested, he said, in exploring opportunities
for reducing production costs to its members
ary, for the next quota year beginning March 1, to
avoid paying the surcharge. Customs sources
said that they had collected $1.76 million in overquota tariff payments this year. Later in February, several U.S. and Canadian wire rod producers were attempting to gain $25 to $35/ton price
increases. Rocky Mountain and GS Industries
were seeking increases of $25 while Ivaco/Quebec was attempting to get increases of as
high as $35/ton, depending upon grade. Current
prices of wire rod are between $270 and
$280/ton, down from about $300/ton last April
and about $80 to $90 less than what they would
be in a stronger market, according to manufacturers. Increases are necessary, they say, to
counter higher energy costs and to restore pricing
up to more reasonable levels (AMM 2/7, 2/26).
(AMM 2/8, 2/13).
Iron Ore Deal Could Reshape Market: The recent agreement under which Australia’s BHP, the
world’s third largest producer of iron ore, would
buy control of Brazil’s second biggest producer,
the Caemi group, has stirred up a great deal of
speculation that it is only the first step in a giant
deal that could change the face of the ore market.
Analysts say that the deal could also involve the
world’s No. 1 ore producer, CVRD of Brazil. Under the agreement, BHP is paying $332 million
for a 60% share of voting stock in Caemi, a slightly higher bid than the offer from CVRD. However,
Mitsui of Japan, which owns 40% of the voting
shares, has 60 days to exercise its right to purchase Caemi on the same terms as the winning
bidder. CVRD reportedly has an agreement with
Mitsui providing that, if it lost in the bidding for the
company, Mitsui would invoke its option, buy the
60% share of Caemi, and then divide the company equally between itself, BHP, and CVRD. But,
no one had any official comment on the speculation, or on whether such an agreement even existed (AMM 2/15).
Carbon Plate: Bethlehem hiked its price of carbon plate products by $10/ton on all orders
scheduled for shipment after Feb. 11. At the
same time, it rescinded its energy surcharge of
$8/ton that it had imposed Feb. 4 on most of its
steel products. The price increase on carbon
plate followed similar moves by several producers, including Geneva Steel, US Steel and Ipsco.
Both Bethlehem and US Steel also announced
their intention to try for an additional $15/ton on
heated plate products, making the total increase
for that product $25/ton. A Bethlehem spokesman said that increased demand from the construction, shipbuilding, bridge, energy equipment,
and machinery sectors of the economy had resulted in a higher level of orders in recent weeks.
Before the price increases, carbon plate prices
had fallen off about $40/ton over a six-month period and were at about $260/ton. Coiled plate is
selling for about $240/ton (AMM 2/8, 2/9).
LABOR/MANAGEMENT
USWA and Oregon Steel Battle On: The running dispute between the United Steelworkers of
America and Oregon Steel flared up again last
month as two western transit systems decided on
company bids to supply their rails. The battle has
run for several years since Oregon, in defiance of
federal labor laws, refused to reinstate many
workers who had been on strike against the company. Among other products, Oregon supplies
rails for metropolitan transit systems.
Early in February, the Tri-County Metropolitan
District of Oregon (Tri-Met), which is expanding
the Portland city transit system, rejected a bid
from Oregon Steel to supply 2,300 tons of rail
and awarded the contract instead to rail supplied
by Pennsylvania Steel Technologies (PSI), a unit
of Bethlehem Steel. The USWA had lobbied
heavily against Oregon Steel and in favor of PSI.
Oregon Steel has filed a protest with Tri-Met.
However, a few weeks later, a similar USWA lobbying effort with the Santa Clara (Cal.) Valley
RAW MATERIALS
Scrap Prices Expected to Fall Still Further:
With the exception of November and December,
scrap prices have been on a year-long slide and
dealers early last month still did not see the light
at the end of the tunnel. Auto bundles at the beginning of February fell by $20/long ton and were
back to $86.50, less than $1 higher than its low
point in October. The decline was the second
largest one-month drop in the past decade. The
weakening economy and the fall in auto sales, as
well as the increasing number of steel companies
either in or near Chapter 11 fueled the continuing
downturn.
At the same time, the Steel Manufacturers Association is setting up a committee to evaluate
the possible introduction of a cooperative scrap
purchasing venture for its minimill members. De-5-
Steel Industry Update/154
Transportation Authority was unsuccessful as
Oregon received the nod to furnish 1,904 tons of
standard rail and 1,080 tons of premium rail for
the VTA system.
The award to PSI of the Portland contract was
made, despite Oregon Steel’s lower bidding
price, because PSI offered “more certainty and
less risk,” according to a Tri-Met spokesperson.
“On-time delivery of rail is critical to the overall
project schedule,” she said, citing a cost of
$210,000 for every month the rail delivery is late.
An Oregon Steel spokesperson disputed TriMet’s claim, saying that Tri-Met had never had a
delivery problem with its rails in the past.
In another development, Oregon Steel, in an
out-of-court settlement with the Colorado Department of Public Health and Environment,
agreed to pay a $600,000 fine for violations of the
state’s environmental regulations on smoke and
particles from steelmaking operations. In addition, the company will pay $400,000 to fund environmental projects in the Pueblo community and
has agreed to invest $15 mil to upgrade its steel
furnace and associated emission control system
steel unit in the nine months proceeding last June
30. Many have blamed the decline in Corus
sales on the weakness of the euro against the
pound sterling since 80% of the company’s exports go to the European continent. A national
steel strike has not occurred in Britain in 20 years
(AMM 1/31, 2/2, 2/5, 2/12, 2/19).
(AMM 1/29, 2/21; Oregon Steel Press Release 2/6, 2/15).
Sharp Union Response to Corus Restructuring, Layoffs: Union leaders and representatives
of the Corus Group, the new Anglo-Dutch conglomerate, reported that their two-hour London
meeting in mid-February was “constructive”. The
meeting came after two months of company activity that included the dismissal of two of its top executives and the announcement, after much secrecy and rumors, that the company was cutting
back sharply and laying off thousands of British
steelworkers. After the meeting, a spokesperson
for the Iron and Steel Trades Confederation reported that it presented its package and the company said it would “give it consideration and get
back to us in a month’s time.”
The crisis came to a head after Corus acknowledged that it was closing a number of mills and
cutting the jobs of 6,050 workers. Previously,
rumors of the cutbacks had spurred talk of a national steel strike and other possible labor actions. The union even made a bid for the Llanwern Works in Wales by putting together a consortium to buy the plant, a move that was rejected by Corus. At the Scunthorpe plant, the union
voted overwhelmingly for industrial action short of
a strike in response to a hundred “redundancies”
or layoffs announced a few months ago. The action could include a ban on overtime and a “work
to rule,” or doing no more than what is called for
in the union contract.
The Anglo-Dutch company reported an operating loss equivalent to $433 million in its carbon
-6-
AK Hits Contract Worker for Talking to Picketers: An employee of Superior Building Services, an outside contractor that provides cleaning services for AK Steel, stopped one day to talk
to a locked-out member of United Steelworkers of
America who was picketing at the plant gates in
Mansfield, Ohio. The conversation proved to be
a costly one for him. The next day, he got a call
from his employer that AK no longer wanted him
to work there.
That charge is the substance of a complaint issued by the National Labor Relations Board
against AK in a case to be heard by an NLRB
administrative law judge May 8. It accuses the
company of acting against the contractor employee because he was sympathetic to the USWA and because AK wants to discourage employees from talking with picketers. To date, the
company has not commented on the case.
On another front in the AK-USWA conflict, the
NLRB rejected a union appeal of its decision issued last July that the company acted illegally in
locking out its workers in Sept. 1999, just after it
acquired the Mansfield plant from Armco. The
lockout occurred just hours before the union contract expired and while negotiations were in progress on a new one. The NLRB ruled that there
was “insufficient evidence” to warrant a ruling that
AK had violated the law (AMM 1/31, 2/15).
Burns Harbor Fire Kills Workers: Bethlehem
Steel strongly denied last month that its own negligence was responsible for the two deaths and
five injuries in a Feb. 2 fire at its Burns Harbor,
Ind., mill. The company was responding to
charges leveled by Paul Gipson, president of
USWA Local 6786, that cutbacks in the safety
program at the plant led to the fire that killed Daniel Kado, 54, a millwright, and Mike Davis, 41, an
outside contractor. The company said that an investigation into the cause of the fire was under
way (AMM 2/7).
TXI-Chaparral: No Comment on Layoffs: TXIChaparral would neither confirm nor deny in midFebruary that it had laid off some 200 workers as
part of a company-wide cost-reduction program.
Industry sources had disclosed that the 200 were
being let go, but the company merely said that it
was doing everything it could to become “as effi-
Steel Industry Update/154
cient as we possibly can in today’s environment.”
TXI-Chaparral produces rebar, SBQ, structural
beams, channels and spring flats.
be closed. It was critical of the $1 billion loan
guarantee program under the measure passed by
Congress last year sponsored by Sen. Robert
Byrd (D.-W.Va.) “Nucor is not supportive of
bailout loans and guarantees,” said the company’s director of marketing, Bob Johns (AMM 2/21).
Co-Steel Advertises for Replacement Workers: Co-Steel Lasco of Ontario, Canada, which
locked out its workers just before Christmas, has
now begun advertising for replacement workers.
The locked-out workers, represented by USWA
Local 6571, had worked for 10 months without a
contract while negotiations were taking place.
The lockout is seen by Co-Steel Lasco workers
as a move to pressure the union into accepting its
terms, which entail a number of major concessions and “givebacks” on the part of employees.
The minimill, employing 500 workers, has an annual capacity of about a million tons. It turns out
long products like beams, rebar, angles, rounds,
squares, channels, special flats and grader
blades.
CAPACITY/TECHNOLOGY
Usinor, Arbed Merger Could Create Global Colossus: The preliminary steps jointly taken last
month between Europe’s two largest steel manufacturers -- Arbed of Luxembourg and France’s
Usinor -- along with Spain’s Acereda, to create a
mega-merger of the steel giants has the potential
of changing the face of the world steel market. In
a memorandum of understanding issued Feb. 19,
the three laid down their intention to form the
world’s largest steel group, employing 110,000
workers and producing 46 million metric tons of
crude steel annually. Its sales, based on last
year’s figures would total 30 billion euros, or
$27.6 billion, a year -- 15 billion euros in flat carbon steel, 5 million euros in stainless steel, 4 million euros in long products, and 6 billion euros in
processing, trading and distribution. Rumors of
the merger talks had been floating around since
last summer when Usinor and Thyssen Krupp of
Germany were said to have held merger discussions. Although it was expected that other European steel companies would react with some
trepidation to the merger, thus far there seems to
be only relief at the prospect. Thyssen Krupp
said it felt strengthened by the step and “favors
any move toward consolidation and restructuring
of the European steel market” which, it felt, would
lead to better balance and capacity utilization.
Salzgitter, Germany’s second largest steel producer, said that it didn’t feel the merger would
have a significant effect on the German market
(AMM 2/19).
In the U.S., Nucor last month told a steel conference that the steel industry needed to be consolidated and that some obsolete facilities should
SDI’s New Structural Mill Finally Gets Permit:
Steel Dynamics, after a year of record sales and
profits, is moving ahead with its intent to build a
new structural mill in Whitley County, Ind. The
company said last month that the Indiana Department of Environmental Management had reissued the air permit for the mill eight months after the U.S. Environmental Appeals Board had
remanded several outstanding issues to the state
agency. The company said that the issues had
now been resolved. Construction of the mill was
to begin last month and will take about 12 to 14
months to complete. SDI also said that it had
completed the repairs to its Iron Dynamics facility,
idled since the middle of last year. The plant has
been plagued by technical problems for several
years. Nearly two years ago, the liquid pig iron
operation opened with much fanfare, but was
forced to close after only five weeks of operation
when a refractory break-out occurred in the submerged arc furnace. The break-out was caused
by the use of the wrong type of brick in the furnace lining. The error caused months of disruption while a new wall, lined with copper, was designed and installed (AMM 1/31; New Steel 12/99).
Nucor Pushes Plans for New Rail Facility: Nucor is pushing ahead vigorously on a new joint
venture with Germany’s Voest-Alpine to build a
new North America rail mill at a site yet to be determined. The rails would be turned out in 320foot lengths, sharply reducing the number of
welds now needed on the standard 80-foot
lengths, thus reducing the most vulnerable spots
on the rails. Industry analysts predict that the
market for rails could grow to 1.2 or 1.3 million
tons a year in the next few years as railroads
seek to replace older lines becoming obsolete.
While the amount of track mileage in the U.S. has
remained fairly consistent at about 170,000 miles,
there has been a substantial increase in the
amount of freight tonnage hauled over the rails,
causing acceleration in wear. “Most of the market is in replacement trade,” said Pennsylvania
Steel Technologies Vice President Kirk Gibson
(AMM 2/8).
WORTHY OF NOTE
New Execs Tapped in Struggle to Turn Birmingham Around: In an effort to reverse the
-7-
Steel Industry Update/154
downturn at Birmingham Steel, its chairman and
CEO, John Correnti, has recruited a number of
his former colleagues at Nucor, where he was also CEO before he and a group of investors
gained control of Birmingham in 1999. The latest
recruit is Christopher Hiller, who joins Birmingham as vice president and general manager of its
plant in Cartersville, Ga. He previously served in
the same capacity at Nucor’s Norfolk, Neb., facility. Correnti is struggling to turn around the operations of a company that showed a net loss of
$119 million for its fiscal quarter ending Dec. 31,
compared with a net loss of $20 million for the
same period a year earlier. Hiller will take over a
structural products mill that is trying to upgrade
the production of medium structural shapes and
billets. It has a capacity of about 900,000 tons of
raw steel a year, a rolling capacity of about
750,000 and employs 125 workers.
Earlier in February, it was announced that Birmingham has pushed back by two months the
closing date for the sale of its SBQ operations in
Cleveland, Ohio and Memphis, Tenn., to North
American Metals, a new company. Birmingham
has been anxious to divest itself of its SBQ operations for some time and negotiated the sale to
North American last September. The final closing
has been delayed, however, by the difficulty
North American has had in putting together financing for the deal. Originally scheduled for late
November, then postponed to January 31, the
closing has now been rescheduled for March 23
(AMM 2/2, 2/23).
tence after pleading guilty in the case, was one of
the witnesses against Mitsubishi (AMM 2/14).
NKK, National Steel, Plan Closer Ties: Two
companies, one based in Tokyo, the other in
Pittsburgh, are planning a leaner, trimmed-down
operation and closer ties between them, according to announcements last month. Under NKK’s
new business plan, it would sell its Tokyo headquarters building and dissolve its holding company for North American operations, NKK USA
Corp., which is deeply in the red. The building
sale is expected to improve its profit to 98 billion
yen ($852.2 million) and its cash flow to 260 billion yen ($2.26 billion) and reduce its debt to 1.25
trillion yen ($10.87 billion). National said it would
take more vigorous cost-cutting measures, including further downsizing of its work force. It was also reportedly contemplating the closing of its No.
6 galvanizing line in its Granite City, Ill., division.
Employing about 9,000 workers, about 370 of
whom are currently on layoff, it planned to cut
back overtime by about 70% and make deeper
cuts in both hourly and salaried workers. Under
the new cooperative setup between them, NKK
will operate two divisions in North America -- one
for the steel business that would include National
and DNN Galvanizing and a second one for engineering and other activities (AMM 2/15).
Enron Uses Commodity Trading for Steel Ecommerce: E-commerce for steel companies
selling their products just hasn’t really gotten off
the ground, but Enron Corp. is now trying a different approach. The Houston-based commodities and energy trader is beginning to trade steel
like a commodity, purchasing it for forward delivery, some as far ahead as five years out, and
making its profits from hedging. The company
said it had begun trading contracts on its web site
(www.enrononline.com) for 7 gauge, 10 gauge,
and 12 gauge HR steel in 48 and 60-inch widths
for delivery as far off as September. So far, the
only shipping destination is Chicago, but other
destinations to be added include Detroit, Houston, Cleveland and Los Angeles. It is currently
buying 10 gauge, 48-inch width HR for $215/ton
and selling it for April delivery in Chicago at $225
Mitsubishi Guilty in Graphite Cartel Case: Japan’s Mitsubishi, the only company to hold out
against pleading guilty or otherwise admitting
culpability in an international cartel scheme to fix
the price of graphite electrodes, was found guilty
Feb. 12 by a federal jury in Philadelphia. No date
was set by U.S. District Judge Marvin Katz for the
amount of the fines that will be imposed on the
company.
A number of companies -- UCAR, SGL Carbon,
Carbide/Graphite Group, Tokai Carbon (a U.S.
subsidiary of Showa Denko) and SEC Corp. were
all implicated in the price-fixing scheme. UCAR
paid a $110 million criminal fine, the largest in the
history of anti-trust enforcement. In response to
a civil suit, it also agreed to pay $80 million in
damages to companies for harm done through illegal price-fixing. In 1999, after reaching a $40.6
million settlement with its shareholders arising
from the case, UCAR then turned around and
sued Mitsubishi for inducing its participation in the
cartel. UCAR’s former chairman, Robert Krass,
who is now completing a 17-month prison sen-
(AMM 2/19).
NOTES ON STEEL TRACK EXHIBITS
Performance data is from monthly AISI sources. Spot Prices (except
OCTG) are from Purchasing Magazine and are FOB Midwest, with no
extras. Hot rolled sheet, 48 inch, temper rolled, ASTM 569; Cold
Rolled Sheet, 48 inch, AISI 366; HD Galvanized Sheet, 120 inch AISI
525, G90; Coiled Plate, A36, 1/2x96x240 inch; Cold Finished Bar,
SBQ 1018; Wide-Flange Beam, A36, W8, 18 lbs; Wire Rod, low carbon; Rebar, carbon, no. 6. OCTG spot prices are from Pipe Logix, FOB
Houston for J55 8REUE Seamless Tube.
-8-
Steel Industry Update/154
Table 3: Selected Canadian Steel Industry Data, November & Year-To-Date
(thousand tons)
Month of November
Year-to-Date
Locker Associates
Steel Track: Performance
2000
1999
% Chg
2000
1999
% Chg
Raw Steel Production1,441
Mill Shipments
..............................
10.2
Exports
.........................................
415
2000
9.8
Imports .........................................1999 773
9.4
Apparent
Steel Supply ................. 1,759
9.0
Imports
as % of Supply ..............
41.7
Utilization
-0.9%Capacity
15,350
15,212
-5.3%
5,186
4,812
-10.5%
8,242
6,093
2000
-6.4%
18,406
16,493
1999 36.9
-44.8
1,454
100%
438
95%
864
1,880
90%
46.0
m
i
l
n
e
t
0.9%
7.8%
35.3%
11.6%
--
t
o
8.6 CSPA 2/26/01
Source:
n
85%
s
8.2
80%
7.8
75%
7.4
7.0
2000
1999
70%
J
9.8
F
9.2
M
10.0
A
9.8
M
10.1
J
9.6
J
9.4
A
9.2
S
8.8
O
8.0
N
8.1
D
8.0
8.5
7.8
8.9
8.6
8.9
8.4
8.6
9.0
8.7
9.6
9.4
9.6
2000
1999
J
90%
F
89%
M
91%
A
92%
M
91%
J
90%
J
85%
A
84%
S
83%
O
81%
N
75%
D
72%
77%
80%
82%
82%
82%
80%
79%
83%
82%
88%
89%
89%
Locker Associates Steel Track: Spot Prices
Flat-Rolled Prices
Other Product Prices
560
$ 540
520
p
e 500
r
CF Bar (SBQ)
480
t 460
o
n
CR Sheet
440
420
400
380
360
340
Plate
320
300
Beam
280
260
Wire Rod
HR Sheet
220
240
89 90 91 92 93 94 95 96 97 98 99 J
F M A M
J
J
A
S O N D
J
F
89 90 91 92 93 94 95 96 97 98 99 J
F M A M
2000
J
J
A
S O N D
2000
Spot Prices for Selected Steel Products, February & Year-To-Date
($ per net ton)
2001
Hot Rolled Sheet......................
220
Cold Rolled Sheet....................
330
HD Galvanized Sheet................
350
Coiled Plate............................... 240
Cold-Finished Bar (SBQ)..........
435
Wide-Flange Beams.................
300
Wire Rod/Low Carbon..............
290
Rebar........................................ 280
Average Spot Price+.................
306
OCTG Seamless Tube...........
1027
Scrap Price ($/gross ton)*.........
87
Sources: Purchasing Magazine, Pipe Logix
Month of February
2000
%Chg
330
-33.3%
440
-25.0%
430
-18.6%
320
-25.0%
460
-5.4%
300
0.0%
300
-3.3%
325
-13.8%
363
-15.8%
924
11.1%
137
-36.5%
+ Composite price of 8 carbon products
Steel Update/154
-9-
2001
223
335
345
240
433
300
290
280
306
1026
97
*auto bundles
Year-to-Date
2000
325
435
430
310
460
300
300
320
360
916
145
%Chg
-31.5%
-23.0%
-19.8%
-22.6%
-6.0%
0.0%
-3.3%
-12.5%
-15.1%
12.0%
-33.1%
J
F
Steel Industry Update/154
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