HBIA-IPIA Spring Meeting
From the Steelmaker’s Perspective
Thomas A. Danjczek
President
Steel Manufacturers Association
March 4, 2010
HBIA-IPIA Spring Meeting
•SMA
•Today’s Concerns
•Today’s Deterioration – US Steel Production
•China, China, China
•Scrap
•Trade Issue
•Is Enough Being Done?
•What does the U.S. need to do?
•Conclusion
Outline
HBIA-IPIA Spring Meeting
SMA
• The Steel Manufacturers Association (SMA)
– 34 North American companies:
29 U.S., 3 Canadian, and 2 Mexican
– 128 Associate members:
Suppliers of goods and services to the steel industry
• SMA member companies
– Operate 125 steel recycling plants in North America
– Electric Arc Furnace (EAF) steelmakers using recycled steel
HBIA-IPIA Spring Meeting
SMA
• Production capability
– EAF steel producers accounted for 60% of U.S. production in 2008
– 62% first half 2009
– SMA represents over 70% of all U.S. steel production
• Recycling
– SMA members are the largest recyclers in the U.S.
– EAF steel producers are the largest recyclers in the world
– Last year, the U.S. recycled over 75 million tons of steel
• Growth of SMA member companies
– Highly efficient users of labor, energy, and materials
– Modern plants producing world class quality products
Alternative Iron Salesman - 2009
HBIA-IPIA Spring Meeting
The Obvious Concerns
-Our Jobs
-US Recession and financial meltdown
-Infrastructure Spending
-Value of the RMB
-Energy shortfalls and pricing
-China, China, China
-Global Steel Overcapacity
-Subsidies and other trade distortions
-US Legislation (111th Congress and the 44th President)
Set the Stage
HBIA-IPIA Spring Meeting
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%
PRESENT – 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)
FUTURE – 2010
World Steel 78m
Peter Marcus 68m
US Poll
69m
(up 19% over 2009), optimistic
(Back to 75m in 2012)
(up 10% over 2009)
HBIA-IPIA Spring Meeting
U.S.Raw Steel Production - 2008 & 2009
Production Tons
10
9
Million Tons
8
7
6
5
4
3
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2008
2009
2008-2009 Monthly
HBIA-IPIA Spring Meeting
U.S. Raw Steel Capability Utilization - 2008 & 2009
Monthly Utilization Percentage
100
Utilizatin Percentage
90
80
70
60
50
40
30
JAN FEB MAR APR MAY JUN
JUL AUG SEP
OCT NOV DEC
JAN FEB MAR APR MAY JUN
2008
JUL AUG
2009
2008-2009 Monthly
SEP
OCT NOV DEC
HBIA-IPIA Spring Meeting
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
NAFTA Production Declines More Than Other World Regions
Global Output Sharply Down, With Few Exceptions
Global Crude Steel Production
2009 YTD vs. 2008 % Change
N. America:
Canada:
U.S.:
Mexico:
-45.1
-51.9
EU27:
-47.0
-39.3
Turkey: -13.5
Russia:
Ukraine: -31.9
-29.5
S. America:
Brazil:
-30.3
-31.4
Asia:
Japan:
S. Korea:-14.9
China:
India
:
Global Production:
Excluding China:
Source: Worldsteel
-26.8
-16.4
-30.9
-2.2
-34.0
+7.5
+1.6
The U.S. Construction Market Is Still Weak
• The residential housing market
has bottomed in the past 6
months – to 40-year lows.
• Home foreclosures are
continuing to rise.
Government incentives (e.g., a
tax credit for first-time buyers)
are helping, but limited.
Tighter credit standards are
reducing the pool of available
new buyers.
• An uptick in the nonresidential, commercial market
is not expected until late next
year.
Source: U.S. Department of Commerce.
The NAFTA Automotive Production Remains
Deeply Depressed
Detroit 3 Production Jan-September 2009
vs. 2008
3000
Chrysler
Ford
GM
2250
1500
750
0
2009 YTD
2008 YTD
While the “cash for clunkers” program has
helped increase production and sales, “Detroit 3”
production has declined by over 50% YTD vs.
2008.
With the end of this incentive program and with
unemployment likely to stay high for several
years, automotive production and sales are
unlikely to return to pre-crisis levels for the
medium term.
Source: Ward’s Automotive. * 2009 Annualized based on September year-to-date.
HBIA-IPIA Spring Meeting
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
(up 47.7%)
The U.S. has lost 3.3 million manufacturing jobs since
2000… imbalances cannot go on forever.
HBIA-IPIA Spring Meeting
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
2005
2006
2007
2008
HBIA-IPIA Spring Meeting
RMDASTM Ferrous Scrap Price Index
Effective 2/20/10
HBIA-IPIA Spring Meeting
AMM “Exports of Ferrous Scrap”
“The full-year export tally of 22,393,975 [in 2009] tonnes set a new annual
record, rising 4.3 percent from the then-record 21467,530 tonnes shipped to
foreign scrap consumers in 2008.”
A Few Numbers…
2009 Exports
21.5M tonnes*
2009 Imports (E)
2009 Consumption
2009 Shredded Exports
2009 HBI
DRI
?
Pig Iron
*USGS January 2010
3.0M tonnes*
48.0M tonnes*
8.5M tonnes*
(64/66 M 2005 to 2008)
HBIA-IPIA Spring Meeting
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.
What does the US need to do
• Assume a Pro-Manufacturing Agenda
–
–
–
–
–
Business Tax Reform
Currency Adjustments
Energy
Reasonable regulatory measures (Environment/Labor)
Climate for investments
• Solve the structural problems that caused the recessionReal Foundation
– Bad loans and securities on bank balance sheets
– Huge trade deficits
• Policy incrementalism is not sufficient
HBIA-IPIA Spring Meeting
Conclusion
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!
HBIA-IPIA Spring Meeting
Questions for SMA Panel at HBIA-IPIA/Cooper Consolidated Meeting
•
How have you managed metallics supplies during the down
cycle?
Who is involved in the metallics purchasing decision? Describe
the decision making process.
How do you value the metallics you buy (i.e., cost per iron unit
purchased or cost per ton liquid steel produced or some other
way)?
Rank in order of importance the following metallics purchasing
factors:
•
•
•
–
–
–
–
–
•
Price
Delivery schedule
Quality (conformity to specification)
Reliability (supplier reputation)
Other (specify)
How do you value carbon content when buying metallics?
HBIA-IPIA Spring Meeting
Questions for SMA Panel at HBIA-IPIA/Cooper Consolidated Meeting
•
•
•
•
•
•
What types of ore-based metallics (DRI, HBI, DRI Fines, pig iron,
and iron nuggets) do you use and in what percentages? How
often (percentage of heats)?
What do you consider the maximum percentage of HBI in a total
charge? Pig iron?
What would be the ideal physical and chemical characteristics of
HBI for your application? Pig iron?
Do you have experience using HBI and pig iron in the same
charge? Explain.
Do you have experience using HBI chips (fraction 4 mm-25 mm)?
How do value HBI chips as compared with HMS 1/2 and HBI?
Do you have experience using HBI fines (fraction below 4 mm)?
How do value HBI fines as compared with HMS 1/2 and HBI?
What are the major difficulties of using HBI fines n the EAF?
What do feel would be the most effective usage of HBI fines?
HBIA-IPIA Spring Meeting
Questions for SMA Panel at HBIA-IPIA/Cooper Consolidated Meeting
•
•
•
•
(For SDI) What has been your experience using iron nuggets from
the ITmk3 process? How do you value iron nuggets as compared
with HMS 1/2, HBI, and pig iron? What are the principal
differences between using iron nuggets and HBI? Pig iron?
(For Tom) Do you see the North American market having room for
additional high quality EAF capacity (i.e., flats, SBQ, fine wire, and
forging bar)? If so, where?
(For Tom) Do you have a feel for the volume of HBI and pig iron
imports in 2010? Could HBI be used in the induction furnace?
Will EAF steel production levels return to first half 2008 levels? If
so, when?
Specialized questions:
•
What value would you place on reducing SiO2 in HBI from 4
percent to 2 percent?
•
Can HBI be applied in induction furnaces?