Transcript Slide 1

STAHL 2011
Wissen, Werkstoff, Werte
Knowledge, materials, values
Competitive Conditions on Regional Steel Markets
Changing Times in the North American Steel Industry
Thomas A. Danjczek
President, Steel Manufacturers Association
1 | 10.11.2011 · STAHL 2011 · © Stahlinstitut VDEh | Wirtschaftsvereinigung Stahl
Stahl-Zentrum
STAHL 2011
Outline
•SMA
•Safety
•Changes
•Steel Demand Drivers & Forecasts
•Raw Materials
•Tone in Washington, DC & Regulations
•What the U.S. Needs to Do
•Final Thoughts
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STAHL 2011
About the SMA
-Composed of 35 North American electric arc furnace (“EAF”)
steel producing Member Companies, and 123 Associate
Member steel industry suppliers
-Today, roughly two-thirds of U.S. steel production comes from
the scrap-based EAF process, up from just 10% in the early
1970s
-SMA Members account for approximately 80% of total
domestic steel capacity
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Where SMA Member EAFs are located…
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STAHL 2011
SMA Safety Overview
Key Drivers to the SMA Safety Committee Success
• Safety Committee Meetings
• SMA Safety Website
• Safety Statistics Benching
• Upstream/Downstream Safety
Marking
Awareness
• Fatality Prevention Initiative
• Education & Outreach
• Workplace Specific Safety
• First Hand Governmental
Surveys
• Sharing of Site-Specific Best
Practices
Compliance Awareness
• SMA Safety Awards
STAHL 2011
Addresses Six (6) critical areas:
1.
Confined Space;
2.
Fall Protection; Lockout-Tryout;
3.
Mobile Equipment
4.
Material Handling; and
5.
Rail
6.
Cranes (Completed in 2011)
Fatality Prevention Initiative
Fatality Prevention

Focusing on five priorities in
addressing crane fatalities:
◦ operator visibility and attentiveness;
◦ maintenance;
◦ fall hazards;
◦ charging the EAF/ladle handling; and
◦ non-routine procedures

Videos to be completed by the
end of summer and introduced to
the SMA in October 2011
STAHL 2011
SMA Safety Data – 2010-2011yoy
Hours Worked
46,000,000
3
45,500,000
45,000,000
45,488,000
44,500,000
44,000,000
43,500,000
2
Hours Worked
44,349,000
2010
Fatalities
1
0
2010
2011
Severity Rate
2011
Lost Workday Case Rate
0.75
26.75
0.72
26.74
26.65
26.55
0.69
Severity Rate
26.45
26.35
Fatalities
4
0.72
Lost Workday
0.66
0.63
26.44
0.65
0.6
26.25
2010
2010
2011
2011
OSHA Recordable Rate
3.65
3.6
3.55
3.5
3.45
3.4
3.35
3.3
3.25
3.2
3.15
3.59
OSHA Recordable
3.32
2010
2011
Rate
Case Rate
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
SMA Board of Directors
recognizes outstanding
safety performance through
the annual Don Daily SMA
Achievement in Safety
Award.
◦ 2011 recipient:
 Chris Bullard and the
Logistics Team Gerdau
Ameristeel Midlothian
US Changes
STAHL 2011
Deeper
Recession
Variable
Cost Control
Scrap Prices
High
Unemployment
Labor
Intensity
Inventory
Levels
China
Foreign
Ownership
Consolidations
Safety
Customer
Requirements
Environmental
Regulations
Engineers
Transportation
Costs
Ore
Prices
Energy
Costs
Currency
State-Owned
Enterprises
Other Factors…
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Steel Changes
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In USA, raw steel capacity utilization may
reach 75% in 2011
Capacity Utilization (%)
100%
90%
80%
70%
60%
50%
40%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011F
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STAHL 2011
Finished steel demand drivers in US
Actual
Fitted
Three variables drive demand:
• NA auto build
• Non-residential construction
• Appliance shipments
R² = 85%
Source: First River
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U.S. finished steel demand forecast
Forecast
Actual ADC
Source: CSM, FW Dodge, AHAM, First River
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STAHL 2011
Auto build & non-res construction expected to
recover, but not to previous peak
NA Auto Build
(Million Units)
Source: CSM Worldwide, FW Dodge
Forecast
Non-Res Construction
(Million Sq. Feet)
Forecast
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STAHL 2011
STAHL 2011
U.S. net imports expected to remain lower
US Imports & Exports
(Million Tons)
Net Imports & US Dollar
Imports (%)
$ Index
Net Imports as % of demand
(3 year rolling average)
Source: AISI, First River
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STAHL 2011
Comments on Current N.A. Steel Industry
• Underlying Weak Economy
• Recovery underway, but slow, last 4 weeks???
• North American steel market under pressure with
unused capacity
• Increased exports and percent imports (5mmt of semi’s
imports) YOY
• Not normal cycle of recession, overcapacity; new supply
coming on
• Relative strong demand in auto; construction lagging
• Raw material costs, and variable cost controls are major
drivers
• Scrap prices expected to trend slightly lower next two
months – too early to call a trend
• China, China, China
• Market cap values at historic lows
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•
•
•
•
•
The Tone in Washington, DC
It’s the Economy, stupid…
Dissatisfaction/Perception that US Government is not tackling
right issues
(More for Wall Street than Main Street during recession)
(Growing deficit, skepticism about role of government)
GRIDLOCK (Democratic President & Senate; Republican House)
Trouble for Incumbents
Lack of Coherent China Policy (Currency?) Recognition that China
has flagrantly violated WTP Rules – i.e. Raw Materials
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•
•
•
Regulations
Vigorous oversight of EPA, OSHA, Dept. of Labor, etc., is a
general theme from the Administration
Prospects for comprehensive climate change legislation are
weak – will see continued Congressional efforts to slow down
EPA’s regulation of carbon emissions
Overwhelming burden of proposed regulations(Power Plant
Emissions; EAF Mercury; Solid Waste, Boeing Case; Silica; Noise; Dust;
Record Keeping, etc., etc., etc.)
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Raw Materials
STAHL 2011
Raw Material Cost and Availability is #1 Issue for
NAFTA 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
– Place a heavy burden on steel industries in developing countries that do not have substantial iron
ore reserves or steel scrap supplies
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National Export Restrictions On Ferrous Scrap Trade
Export Bans
Quotas
Export Taxes
Elimination of VAT Export Rebates
Non-automatic (discretionary)
Licensing Agreements
Other Administrative Barriers
(i.e. –Port Restrictions)
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World Scrap Exports, 2000 - 2010
Million Metric Tons
120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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Share of World Scrap Exports, 2010
USA
23%
Other
38%
USA
EU-27
Japan
Canada
Russian Federation
Other
EU-27
21%
Russian Federation
5%
Canada
6%
Japan
7%
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Major Scrap Importers, 2010 and 2009
Country
2010
2009
Turkey
19.20
15.7
Korea
8.7
7.8
China
5.8
13.7
India
4.7
5.1
Taiwan
4.2
3.9
USA
3.8
3.0
EU-27
3.6
3.3
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World Scrap Supply and Consumption, By Region
World Scrap Supply, 2008
120
Million Metric Tons
100
80
Domestic Supply
60
Apparent Consumption
40
20
0
EU
Turkey
CIS
NAFTA
Latin America
China
Japan
Other Asia
Source: World Steel Association
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STAHL 2011
While China Restricts Exports of Scrap, U.S.
Exports to China Have Surged
U.S. Scrap Exports to China - 2004 - 2009
Total Quantity Exported (Metric Tons)
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2004
2005
2006
2007
2008
2009
Source: U.S. International Trade Commission - Dataweb
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China
Can only hope next 5 year plan which calls
for 8% growth is WRONG!
Actual Production
.08 x 600mmt x 5 years = 240mmt…
281mmt compounded
WOW!
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Scrap Demand Forecasts
Scrap demand (mt) – 2017
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World Demand For Steel Scrap
World demand for steel scrap is likely to continue to increase
•
•
•
Increased Steel Production In China, India and Brazil
Economic Recovery
Limited Growth of Alternative Iron Units
But A Large Number of Countries Still Impose Restrictions On Exports of Scrap
and Other Raw Materials
Steel Scrap Is Subject To More Export Restrictions Than Any Other Raw Material
There Is A Significant Problem With Transparency Because Export Restrictions
Change Frequently, Making Supply Even More Problematic
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STAHL 2011
What does the U.S. 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 recession - Real
Foundation
– Bad loans and securities on bank balance sheets
– Reduce huge trade deficits
• Stop the trade distorting restrictions in raw materials or ensure
prompt reciprocity (SOEs?)
• Policy incrementalism is not sufficient
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•
•
•
•
•
Final Thoughts
In steel, the world has changed (Developing world, not about USA, getting tougher,
ownership)
U.S. is in a traffic jam, moving slightly forward, but don’t know other consequences.
Don’t look to Washington, DC for help
Environment of uncertainty and volatility will continue in U.S. industry until economic
fundamentals are in equilibrium, last 4 weeks???
In U.S., dissatisfaction/perception that U.S. Government is not tackling the right
issues (i.e. “It’s the economy, stupid.”)
Reasons for optimism in steel in U.S.:
– Scrap-based, 75% of cost – local supply
– Low cost on global basis (energy is neutral, labor less than 10%, others have
higher transportation costs)
– Relatively strong U.S. market and U.S. resiliency
– Better U.S. company balance sheets
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STAHL 2011
Wissen, Werkstoff, Werte
Knowledge, materials, values
Competitive Conditions on Regional Steel Markets
THANK YOU FOR YOUR ATTENTION
Thomas A. Danjczek
President, Steel Manufacturers Association
33 | 10.11.2011 · STAHL 2011 · © Stahlinstitut VDEh | Wirtschaftsvereinigung Stahl
Stahl-Zentrum