The world’s steelmakers now produce 1 billion tons of steel annually, and it does not look like that number is likely to shrink back under 1 billion any time soon.
Presenters at the Ferrous Roundtable at the Institute of Scrap Recycling Industries Inc. (ISRI) Commodities Forum were predominantly bullish toward the future of steel demand and pricing, as well as demand and pricing for the ferrous scrap used to make steel.
Steel industry analyst Michelle Applebaum of Highland Park, Ill., predicts that domestic steelmakers this summer “have seen a low . . . both in production and prices” that will not be typical for the next two years.
Her forecast predicts an average price of $569 per ton hot-rolled steel coil in 2006 and an increase to $650 average pricing in 2007.
Additionally, she believes steelmakers in the U.S. will boost production of steel from an estimated 101 million tons in 2005 to 109 million tons next year and nearly 111 million tons in 2007.
As for scrap, Applebaum says her research firm sees “a continued metallics price push” as new steel production already in place in China and being added in India will strain supplies of iron ore, coke and ferrous scrap. “I don’t think scrap surcharges will go away,” she says of the ability of steelmakers to pass along higher costs. “Nucor is committed to them.”
While China’s surging 300 million tons of production has pushed the world’s annual production past 1 billion tons, India is producing just 35 million metric tons in a nation with nearly as many people as China.
New Delhi-based commodities broker Vidal Sahgal reported, though, that India’s Ministry of Steel is targeting production increases that will help India make 110 million metric tons of steel by 2020.
Among the results of such an increase, according to Sahgal, would be the disappearance of India as an exporter of iron ore, and a currently “unorganized” scrap industry may receive more financial attention to meet a growing steel industry.
More consolidation within the steel industry is also likely, according to John Harris of Mittal Steel NA, Chicago.
Mittal makes 65 million tons of steel annually at mills located around the world, but even this represents less than 7 percent of global production. “There is still more to happen,” Harris said of steel industry consolidation, noting that by comparison three iron ore companies comprise 70 to 80 percent of that market.
Harris also commented that further consolidation is warranted in the scrap market, and called the recent Simsmetal-Hugo Neu merger “very impressive.”
Steel consumer Kyle Stavig of steel drum manufacturer Myers Container, Emeryville, Calif., said the growing pains of the steel industry are apparent to his company, which has had to pay more for steel the past two years, and has had difficulty finding steel to purchase in the wake of the Air Products hurricane-related shutdown that caused some EAF steelmakers to restrict production.
Stavig said that even though Myers Container consumes 25,000 tons of steel annually, it had a difficult time tapping into its suppliers for steel. “There is a frenzy going on right now,” he said in regard to the purchase of some forms of steel.
The ISRI 2005 Commodities Roundtable Forum was held in suburban Chicago from Sept. 20 to Sept. 22. Some 600 brokers, traders, processors and suppliers gathered for the educational and networking event.