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transcript
Thomas A. DanjczekPresidentSteel Manufacturers AssociationFebruary - 2009
AWPA – Annual Meeting
Steel Producers Issues in Today’s Economy
OutlineAWPA – Steel Producers Issues in Today’s Economy
•SMA
•Today’s Concerns
•Today’s Deterioration
•China, China, China
•Other Issues (Energy, GHG, Infrastructure Spending, Mercury)
•Product Data 2008
•Protectionism and Trade Issue
•Is Enough Being Done?
•Conclusion
• The Steel Manufacturers Association (SMA)– 36 North American companies:
31 U.S., 3 Canadian, and 2 Mexican– 125 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
SMAAWPA – Steel Producers Issues in Today’s Economy
• Production capability– EAF steel producers accounted for 60% of U.S. production in 2007– 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
SMAAWPA – Steel Producers Issues in Today’s Economy
Steel-Wire Executive-4th Quarter 2008
The Obvious Concerns
-Our Jobs
-US Recession and financial meltdown
-Infrastructure Spending
-Value of the RMB
-Energy shortfalls and pricing
-Federal Bailouts
-China, China, China
-Global Steel Overcapacity
-Subsidies and other trade distortions
-US Legislation (111th Congress and the 44th President)
AWPA – Steel Producers Issues in Today’s Economy
NAFTA Economic Growth Is Decelerating
NAFTA Real GDP Since 2006
-2
-1
0
1
2
3
4
5
6
7
2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3
Rea
l G
DP
(Q
uar
terl
y %
Ch
ange
, S
AA
R)
USA Canada Mexico
Sources: Bureau of Economic Analysis, Statistics Canada, Bloomberg
AWPA – Steel Producers Issues in Today’s Economy
Source: Federal Reserve Board
U.S. Gross Domestic Product
2.2
2.5
3.9
3.3
1.3*thru
9 m o.
3.2
2.0
0
0.5
1
1.5
2
2.5
3
3.5
4
%
The United States Is in a Recession
AWPA – Steel Producers Issues in Today’s Economy
U.S. Business Activity Has Fallen Sharply
Source: ISM
U.S. Purchasing Managers Index (PMI) Since 2003
35
40
45
50
55
60
65
70
2003 2004 2005 2006 2007 2008
EX
PA
ND
ING
CO
NT
RA
CT
ING
Lowest level since 1982
AWPA – Steel Producers Issues in Today’s Economy
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2001 2002 2003 2004 2005 2006 2007 2008
Permits Starts Completions
Residential Construction Market
The U.S. Housing Market Is Plummeting
Source: US Dept of Commerce
AWPA – Steel Producers Issues in Today’s Economy
20072008
1.18
0.74
-37%
US LV SALES
NOV NOV
North American Light Vehicle Production
Mil
lion
s of
Un
its
Source: Automotive Market Research Council, Fall 2008
ActualActualActualActual
Mil
lion
s of
Un
its
13.0 12.8
AMRC Data Fall ‘08
AMRC Data Fall ‘08
ActualActual
AWPA – Steel Producers Issues in Today’s Economy
Dow Jones Index - 2008
7,000
8,000
9,000
10,000
11,000
12,000
13,000
2008 Weekly
Dow
Jon
es V
alu
e
500
700
900
1,100
1,300
1,500
1,700
1,900
2,100
2,300
2,500
Dow Jones Daily Closing Value U.S. Weekly Raw Steel P roduct ion
Production (Thous. Metric Tons)
Steel Production in the U.S. Has Fallen Dramatically
Source: Dow Jones Industrial Index, AISI
AWPA – Steel Producers Issues in Today’s Economy
After Years of Growth, Global Steel Consumption Has Fallen
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1,350
1,400
1,450
1,500
1Q2005
2Q2005
3Q2005
4Q2005
1Q2006
2Q2006
3Q2006
4Q2006
1Q2007
2Q2007
3Q2007
4Q2007
1Q2008
2Q2008
3Q2008
(e)
Mil
lion
s of
MT
Global Apparent Steel Consumption (Annualized)
Source: World Steel Dynamics, “Global Alert # 31” (Oct. 1, 2008) at 12.
AWPA – Steel Producers Issues in Today’s Economy
World Steel Capacity Grew by Over 50% in the Past Eight Years.
Source: German Steel Federation and IISI verifications
Global Steel Capacity Through 2008
World Crude Steel Capacity 2000-2008
1,065 1,065 1,0981,173
1,2491,361
1,4561,564
1,654
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Ste
el C
ap
ac
ity
(th
ou
sa
nd
me
tric
to
ns
)
0
5
10
15
20
Cu
rre
nt
Av
era
ge
Gro
wth
Ra
te (
CA
GR
)
World Crude Steel Capacity CAGR
90*
*Additions to Capacity
AWPA – Steel Producers Issues in Today’s Economy
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 352.0 416.0 489.0 498.0 470.0
Net Exports 0.5 29.7 41.7 51.0 49.0
Source: Growell Research, “China Steel Capacity Forecast for 2006-2010” and CISA Presentation at OECD, December 15, 2008.
AWPA – Steel Producers Issues in Today’s Economy
Imports from China into NAFTA are Rising
CHINESE IMPORT SHARE OF U.S. APPARENT SUPPLY - 2008
0%
5%
10%
15%
20%
25%
30%
2008
PERCENT OF U.S.
DEMAND
PERCENT OF U.S. FINISHED
IMPORTS
CHINESE IMPORT SHARE OF TOTAL DEMAND CHINESE % OF IMPORTS
Source: AISI
AWPA – Steel Producers Issues in Today’s Economy
China’s Capacity Now Exceeds Chinese DemandFor Many Key Steel Products
2008 Difference Between Chinese Capacity and Chinese Demand
Source: World Steel Dynamics, “Global Steel Alert # 31” (Oct. 1, 2008) at 17, 25.
0
5
10
15
20
25
30
35
Hot-rolledsteel
Plate OCTG Wire rod Rebar Cold-rolledsteel
Galvanized sheet
Mill
ion M
etr
ic T
ons
AWPA – Steel Producers Issues in Today’s Economy
China Steel Comments
•China has NOT become the world’s Largest steel producer by accident, or by operation of free markets, or comparative advantage
•China is NOT a low-cost steel producer
•China has reached its position through a combination of subsidies, mandates, and planned intervention
•In finished goods containing steel, China’s exports to absorb overproduction
•Chinese steel industry is overbuilt and under-demolished
AWPA – Steel Producers Issues in Today’s Economy
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 (up 47.7%)
The U.S. has lost 3.3 million manufacturing jobs The U.S. has lost 3.3 million manufacturing jobs since 2000… imbalances cannot go on forever.since 2000… imbalances cannot go on forever.
AWPA – Steel Producers Issues in Today’s Economy
China Conclusions
It’s About Competitiveness US producers have a competitive advantage in metallics due to US
scrap and China’s need to import over half its ore; US producers are on par with China on availability and price of energy, while labor is much lower in China; China’s labor savings do not equal US efficiency and Transportation cost from China.
US is competitive!!!
North American steel industry CANNOT compete against Chinese steel companies that are financed and controlled by their government.
AWPA – Steel Producers Issues in Today’s Economy
AWPA – Steel Issues in Today’s EconomyOther Issues - Energy
Other Issues - Energy
AWPA – Steel Producers Issues in Today’s Economy
Other Issues - Energy
AWPA – Steel Producers Issues in Today’s Economy
Energy Summary
• US power generation industry is at a critical juncture, with social pressures and pending legislation demanding massive changes.
•Competing demands for reliable, low-cost energy and climate change mitigation appear incongruent.
•Our Nation’s liquid fuel dependence on foreign resources continue to grow.
•Uncertainty of regulatory outcomes and rising costs impact industry’s willingness to commit capital investments, endangering near-term production capacity.
• The United States must foster new processes that address conflicting energy objectives simultaneously.
Other Issues - Energy
AWPA – Steel Producers Issues in Today’s Economy
D R A F T8
T h e U . S . S t e e l I n d u s t r y H a s O n e o f t h e L o w e s t P r o c e s s E m is s io n s I n t e n s i t i e s
in t h e W o r ld
0 .4 9 0 .4 6
0 .9 3 0 .9 6
1 .0 51 .1 2
1 .3 6
0 .0 0
0 .2 0
0 .4 0
0 .6 0
0 .8 0
1 .0 0
1 .2 0
1 .4 0
1 .6 0
Un ite d S ta te s Ca n a d a Me x ic o G e rma n y A u s tr a lia Ru s s ia Ja p a n
Met
ric T
ons
CO
2/M
etric
Ton
of S
teel
Other Issues - GHGAWPA – Steel Producers Issues in Today’s Economy
D R A F T
7
P ro ce ss G H G E m iss io n s P e r T o n H a ve F a lle n B y 4 8 % S in ce 1 9 9 0
0 .0 0
0 .2 0
0 .4 0
0 .6 0
0 .8 0
1 .0 0
1 .2 0
1 9 9 0 1 9 9 5 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6
To
ns
CO
2/T
on
Ste
el
Other Issues - GHGAWPA – Steel Producers Issues in Today’s Economy
Climate Change Legislation
Steel Manufacturers Association:
•Supports the safety valve concept for limiting allowance pricing, in any
cap & trade program;
•Recognizes the international component of the climate change issue, and
would support the the use of industrial offsets, regardless of locale, as
one way to respond to greenhouse gas emissions; and
•Believes that the cost associated with any cap and trade program must
avoid double charging emissions (ie- The electricity generator and EAF
mill consumer each must only be counted once on emissions).
Other Issues - GHGAWPA – Steel Producers Issues in Today’s Economy
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 Plate
WeirtonNelson 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)
AWPA – Steel Producers Issues in Today’s Economy
• US aging infrastructure is functionally obsolete and structurally deficient
• FHWA estimates $78.8 billion per year for the next 20 years to maintain infrastructure, $131.7 billion to improve
• Gas tax at 18.54/gallon generates app. $40 billion
• Current gas tax woefully insufficient, only half of maintenance
Infrastructure Stimulus
AWPA – Steel Producers Issues in Today’s Economy
U.S. Steel Scrap(Data in million metric tons)
Source: US Geologic Survey, January 20081. 2008 is a rough estimate based on 3 normal quarters; 4 th Quarter @ 60% steel production
Salient Statistics—
United States:2003 2004 2005 2006 2007(e) 2008(e)1
Production
Home Scrap17 14 15 13 13 12
Production
Purchased Scrap
56 59 58 58 58 52
Imports for Consumption 4 5 4 5 5 4
Exports 11 12 13 15 15 23
Consumption, reported 65 67 66 66 66 59
AWPA – Steel Producers Issues in Today’s Economy
US Long Product Data 2008
For rebar, wire rod, merchant bar, light shapes, parallel flange sections, structural products1
1 December 2008 SMA Market Report (Moss/Taccone)
Through September 2008, domestic shipments plus exports were 4.1% higher than 2007, at 18,918,329 short tons, or roughly 2.1 mmt per month.
Data shows domestic shipment decline of 16% in October from September’s level.
Data shows domestic shipment decline of another 27% in November from October’s level.
Total domestic produced shipments have fallen approximately 50% in the 4th quarter, compared to the first 9 months of 2008.
AWPA – Steel Producers Issues in Today’s Economy
Wire Rod Product Data 2008
Total Mill Shipments of Wire Rod were unchanged YOY
(2008 – 3,182,008 tons; 2007 – 3,178,027 tons) First 9 months of 2008, mill shipments – Quarterly Rate –
903,604 tons/qtr
Last Quarter of 2008 mill shipments – Quarterly Rate – 471,196 tons/qtr
Off 47.8% in 4th Quarter 2008, compared to 1st Quarter 2008
December 2008 SMA Market Report (Moss/Taccone)
AWPA – Steel Producers Issues in Today’s Economy
AWPA – Steel Producers Issues in Today’s Economy
Free Trade vs. Protectionism
Protectionism -Predatory Pricing -Trade distorting subsidies -Government Ownership-National power by protecting our industries and state -Piling up currency measures -One way trade
Need “Balanced” Trade over “Mercantilism”
Who’s the Protectionist?
Is “Protectionism” the enemy of “Free Trade”
1. Taken in part from C. Blum
AWPA – Steel Producers Issues in Today’s Economy
Is Enough Being Done?
Raw Materials
Energy
China
Trade
No
No
No
No
Barriers continue
Lack of policy continues
Currency manipulation, Subsidies, Not playing by the rules
Distortions continue, Who’s the protectionist
No long term structural policy changes are being proposed in Washington for taxes, trade imbalance, and energy.
AWPA – Steel Producers Issues in Today’s Economy
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 in October”;― 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!― Improved Debt and Equity; Balance Sheet Position
― Still Challenging – But Reasons for Meaningful Long-Term Optimism!
AWPA – Steel Producers Issues in Today’s Economy