SteelOrbis ALL ABOUT STEEL TRAINING
WORKSHOP
Thomas A. Danjczek PresidentSteel Manufacturers AssociationSan Diego, CAJuly 8, 2010
History of American Steelmaking
• SMA• Early 20th century American steel• Transformation of steel making from Open Heart Furnace to BOF and later to EAF• EAF and evolution of minimill concept• Advantages of minimills• Dominant companies throughout 20th century• Mergers and Acquisitions among modern American steelmakers• American Steel Making in Crises: 1980’s, late 1990’s, early 2000’s• Various trade remedies - Trigger price mechanism / Section 201 Safeguards / 421 Safeguard• Antidumping and Countervailing Cases• Other trade issues: Fraud, NME’s, WTO, etc.• Largest North American steelmakers• Product mix: longs, flats, specialty steel• Current issues that American steelmakers are facing• Where do we go from here? • What are the trends?
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• 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
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Where SMA Member EAFs are located…
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U.S. Steel Industry, Then. . . . . . . . .and Now
Smoke pouring into the air from a Pittsburgh steel mill, 1890. Image by Corbis - Bettmann
Electric Arc Furnace facilityImage by SMA
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Early US Steelmaking
Source – Stubbles, J.R. The Original Steelmakers. Iron & Steel Society, Warrendale, PA, 1984. 5, 33.
SteelOrbis Training US Steel Production by Process
In 2009 64% EAF
SteelOrbis Training World Steel Production by Process
In 2009 37% EAF
SteelOrbis Training US Steel Production
Year US Raw Steel1 (Metric Tons)
1900 9,200,000
1910 23,700,000
1920 37,800,000
1930 36,000,000
1940 78,000,000
1950 87,800,000
1960 90,100,000
1970 119,000,000
1980 101,000,000
1990 89,700,000
2000 102,000,000
2010 70,000,000 (e)
1US Geological Survey
US Capacity; Production & % EAF & Integrated – 2000-2009
Source – U.S. Geological Survey – Iron & Steel Statistics and Information web page = http://minerals.usgs.gov/minerals/pubs/commodity/iron_&_steel/
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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 25m (45% utilization)2nd Half 36m (62% utilization) Now 1.5m/week vs. 2.1m/week Year 63m (Minimills at 63% of production)
2010 (from November 2009) World Steel 78m (up 19% over 2009), optimistic Peter Marcus 68m (Back to 75m in 2012)
US Poll 69m (up 10% over 2009)
2010 – Today (Through March 30) Capacity Utilization (67.7%); or approximately 80 million tons annual rate
42.9% in 2009
Set the StageSteelOrbis Training
2009 in a long term contextUS steel industry production changes
Source: AISI, First River
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
1900
1905
1910
1915
1920
1925
1930
1935
1940
1945
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
2010
Ye
ar
on
Ye
ar
Ch
an
ge
in P
rod
uc
tio
n
World USA
Year Decline
1 1921 -53%
2 1932 -47%
3 1938 -44%
4 1908 -40%
5 1982 -38%
6 1931 -36%
7 2009F -30%
8 1930 -28%
9 1914 -25%
10 1958 -24%
11 1919 -22%
12 1954 -21%
13 1975 -20%
14 1980 -18%
15 1946 -16%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Cap
acity
Util
izat
ion
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
Cap
acity
Util
izat
ion
US raw steel capacity utilizationLong-term average is 78%, stable
level is 85%
Source: AISI, First River
63% 48% 65% 61%
Average Utilization RatesPeriods of adjustment (red bars): 60%Periods of relative stability: 85%
Steelmaking Flowlines
EAF Process Flow Diagram
Flat Rolled Breakdown
Long Product Breakdown
Top Global and North American Steel Producers - 2006
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Source – Adapted from Metal Bulletin (March 12, 2007) for data on tonnage and global rankings.
Globalization and Consolidation Developments Have Dramatically Changed the NAFTA Steel Landscape
Acquiring Company Acquiring Company Acquiring CompanyAcquired Company Acquired Company Acquired Company
Arcelor Mittal Nucor Duferco/NLMKArcelor Connecticut Steel Winner Steel
Dofasco TricoMittal Birmingham Evraz
Ispat Inland Corus Tuscaloosa Oregon SteelISG Worthington-Decatur Claymont Steel
LTV Marion Ipsco CanadaUS Steel PlateWeirton
Nelson SteelHarris Steel Severstal
Acme-Riverdale Auburn Steel Arcelor Mittal-Sp. Pt.North Star Arizona Rouge
WCI
Georgetown American Iron ReductionSicartsaBayou
LMP Steel & Wire
CSNHeartland
US Steel Gerdau AmeristeelLone Star Sheffield
EssarNational Chaparral AlgomaLTV Tin Co-SteelMinnesota SteelISG IH#2 Pkl. North Star
Stelco Sidetul Tultitlan Quanex Macsteel
BlueScope CorsaIMSA Steelscape
OAO TMKSSAB
Ipsco Tubular (U.S.)ICH/Grupo Simec Ipsco Plate (U.S.)Republic
Steel DynamicsTernium GalvPro-Jeffersonville
Hylsa The TechsIMSA Roanoke Steel
Steel of West Virginia
TenarisMaverick Tube (U.S.) Prudential Canada
Hydril Company
Wheeling Pitt
1/1/09
Bethlehem
The David J. Joseph Co. (Scrap)
Omnisource (Scrap)
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1970’s 2008
Production
Employment
Technology
Location
Imports
Profitability
Average Price
short tons
Approx. 700,00012 MH/ton(1978 – 449,000)
<20% casters<10% EAF
Primarily Rust Belt & a few scattered
Approx. 15%
Poor
$605
100 million tons
<120,000(Minimills @ 60% - approx. 40,000, <2MH/ton)
95% casters60% EAF
NW, SE, Rust Belt (near customers, and cheap power)
Approx. 25% (peak @ 35%)
Good
$1000???
100-140 million tons
2010
80 million tons, 63 in 2009
100,000
+
20%
Marginal
$600
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-U.S. has become one of the world’s low cost steel producers, due to metallics availability, transportation, labor and energy efficiencies, and high utilization
-China, which was approx. 70mmt in 1970’s, today over 500mmt
-Many large integrated producers eliminated legacy costs in 1998-2003 period through bankruptcies (30 companies)
-World demand for all raw materials has changed from excess to shortages
-Last integrated mill built, Burns Harbor, was 1964-1970
-Growth in U.S. lost to foreign producers (1970 – U.S. approx. 20% of world; today, less than 10%)
-U.S. steel capacity has been reduced from approx. 170 million tons in the 1970’s, to 130 million tons today, while production has been around 100 million tons
-Steel sales in 1970’s were less than $60 billion USD
-Profitability: net income as a % of sales was only .5 to 2.5% (1974) in the 1970’s. Insufficient to cover down cycles
-Significant quality improvements
-Metallics yields have improved from 75% in 1970 to over 90% today
-The next challenges are availability of scrap, scrap substitutes, energy, people, and customers
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Source – AISI, “The Steel Import Problem.” New York, NY. 1968. Page 6.
U.S. Foreign Trade In Steel Products (Million Net Tons)-Life in the ‘60
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Crude Simple Estimate – Long Products
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Employment in the U.S. Steel Industry
Source – U.S. Department of Labor. Bureau of Labor Statistics.
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1. Section 421 – Against Chinese Tires- When China joined WTO, part of agreement was a 421 Safeguard to avoid surges &
injuries- Filed by Unions only, case heard at ITC, 4-2 in favor, awaiting remedy recommendation by
ITC- Key is Presidential discretion; under Bush; won 6 cases, but no remedy- Positive from President, low cost legal approach only needs to show surge and harm, not
dumping, subsidies, etc.
2. WTO Complaint By US Government- 9 materials, some steelmaking raw materials- Seems counterintuitive - don’t want Chinese exports, but the complaint is against hoarding
of materials. But, quotas are illegal.- Chinese defense will be Article 20, preserve raw materials; Coke is a key.- Next steps: consultation between governments, followed by dispute resolution- Allows Chinese finished goods to be artificially cheaper
3. Antidumping/Countervailing Cases
4. 201 Safeguard (2001)
Trade CasesSteelOrbis Training
Trade UpdateItem Plus Minus SMA Action
OECD Only Global Forum No Measured Outcome Participate in China in October – Raw Materials
NASTC Hangtime w/NAFTA Officials; Governments see value
5 years = Bureaucratic Press NAFTA competitiveness Issues w/industry and Governments
ITAC 12 Influence to DOC & USTR
“Confidentiality”; needs more US producers
TAD Vice Chair
US China Dialogue Cards on the Table Even God does not know next meeting date
Participate w/members
Buy America Relatively unchanged since 1932
Negative Press Hold Course
ITC Support Members Lawyers Continue Support
China Steel Trade Elephant in Room Potential Threat Cases, Press U.S. Govt.
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Trade Update
Item Plus Minus SMA Action
Customs Fraud Big Deal in Circumvention, mislabeling, duty avoidance, etc.
Time Lag Participate in Customs Training and CSUSTL
Chinese Currency Now National Issue 7 years Continue Raise Money
FTZ – Alabama 2nd Filing Duty Avoidance including raw materials
Oppose Partial Approval
Retrospective / Prospective AD/CVD Duty System
Support Retrospective Prospective Less Accurate
SMA Testified
VAT Taxes Some Noise Not Tax Increase Reduce Personal and Corporate Tax accordingly
Trade Legislation Noise Not Today Support Activity; No Action
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Trade Update
Item Plus Minus SMA Action
Trade Statistics SIMA Helpful AIIS Comments Continue Comments, press surge component;Jobs, Jobs, Jobs
WTO Raw Materials Case
International Support Negotiated Solution? Principle is important
Doha Negotiations No Progress It’ll be back Through ITAC
Climate Change Not 2010 Waxman, etc. Press no Global Exceptions
American Scrap Coalition
Not just steel % scrap exports White Paper underway
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1963
1965
1967
1969
1971
1973
1975
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1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Mill
ion
Uni
ts
2009 Was Only the Second Year Since 1963 in Which North America Produced Fewer than 9 Million Cars and Trucks
North America Car & Truck Production, 1963-2009
Source: Ward’s Automotive.
9 million cars and trucks produced
1982
Recent gains in North American car and truck production notwithstanding, it is projected that it will take up to five years to return to pre-crisis ”normal” levels.
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50
100
150
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450
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Q1 200
4
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Q3 200
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9
'000
Sta
rts
The U.S. Construction Market Remains Weak
U.S. Single-Family Housing Starts, Q1 2004 through Q4 2009
Source: U.S. Census Bureau.
•Foreclosures remain a problem for both residential and non-residential construction.
•While residential construction is projected to increase, it is not expected to regain its 2008 level until 2013.
•The value of non-residential construction put in place fell by 9% from 2008 to 2009, and is projected to continue falling through 2011.
Source: Worldsteel
World Crude Steel Capacity 2000-2012
1,062 1,062 1,0951,170
1,2451,356
1,453
1,583
1,8161,917
1,9972,055
1,654
100
350
600
850
1,100
1,350
1,600
1,850
2,100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(e) 2011(e)
Ste
el
Cap
ac
ity
(m
illio
n m
etr
ic t
on
ne
s)
0
5
10
15
20
Cu
rre
nt
Av
era
ge
Gro
wth
Ra
te (
CA
GR
)
World Crude Steel Capacity CAGR
2012(e)
Global Steel Capacity Continues to Increase
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Crude Steel Supply in China, 2005-2009 (million metric tons)
2005 2006 2007 2008 2009 (e)
Capacity 450.0 530.0 599.0 640.0 (e) 660.0
Production 352.0 416.0 489.0 498.0 500.0
Net Exports 0.5 29.7 41.7 51.0 40.0
Source: Growell Research, “China Steel Capacity Forecast for 2006-2010” and CISA Presentation at OECD, December 15, 2008.
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Sources: US Department of Commerce for trade $ balances; AISI estimates for indirect steel trade
China as Percent of Total External U.S. Indirect Steel Trade Deficit 2000 - 2008
23.8 25.228.5 27.2
39.3
20.517.6
0
5
10
15
20
25
30
35
40
45
50
2001 2002 2003 2004 2005 2006 2007 2008
Per
cent
of E
xter
nal N
AFT
A In
dire
ct
Trad
e
53.5
In 2008 China Was Responsible for Over Half of the U.S. Indirect Steel Trade Deficit
Source: Data for China taken from World Steel Dynamics, Inside Track # 102 (Jan. 15, 2010). Data for Japan and NAFTA taken from the World Steel Association web page.
Over the Last Three Years, China’s Increase In Steel Production Far Exceeded Total 2009 Steel Production In Both Japan And The United States
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200
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400
500
600
NAFTA Crude Steel Production in2009
Japanese Crude Steel Production in2009
Chinese Crude Steel Production in2009
Increase in Chinese Crude Steel Production 2006-2009
0
100
200
300
400
500
600
1995
1997
1999
2001
2003
2005
2007
2009
mil
lion
s of
MT
0
5
10
15
20
25
30
35
40
45
50
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
perc
ent
China’s crude steel productionChinese crude steel production as a percentage of total world production
Source: World Steel Dynamics, Inside Track # 77 (May 30, 2007); World Steel Dynamics, Inside Track # 102 (Jan 15, 2010).
Last Year, China Accounted for Almost Half of Total World Crude Steel Production
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10
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30
40
50
60
70
80
90
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Mill
ion
To
ns
Exports
U.S. Consumption
U.S. Scrap Consumption and Exports
2009 – Exports 22.3mtImports (e) 3.0mtU.S. Consumption 48.0mt
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United States
Million MT2009 (e) 2010(f)
Change (%)
Crude Steel Use
65.1 81.8 25.5%
Finished Steel Use
57.4 72.7 26.5%
Exports 8.5 11.3 32.9%
Imports 12.9 13.7 6.2%
Canada
Million MT2009 (e) 2010(f)
Change (%)
Crude Steel Use 10.6 13.1 23.9%
Finished Steel Use 9.5 11.8 23.9%
Exports 4.9 6.4 29.6%
Imports 6.0 7.7 28.3%
Mexico
Million MT2009 (e) 2010 (f)
Change (%)
Crude Steel Use 17.7 22.1 24.5%
Finished Steel Use
13.9 15.5 10.9%
Exports 2.0 2.4 20.0%
Imports 3.2 3.6 12.5%
Source: Worldsteel Economic Studies Committee, April 2010
The Worldsteel Short Range Outlook
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