Steel Rising with Room to Grow

The steel industry in North America has been battered for the past several years, but is finally enjoying some profitability. At long last in 2002, steelmakers were able to charge a little more for their products, and 2003 should provide similar breathing room, according to presenters at the Institute of Scrap Recycling Industries Inc. (ISRI) Commodity Roundtables, being held last week in Chicago.

Keith Busse, CEO of Steel Dynamics Inc. (SDI), Fort Wayne, Ind., credits electric arc furnace (EAF) steelmakers with keeping American steel companies competitive. At one of SDI’s plants, “a ton of steel can be made with just .3 man-hours,” said Busse, down from traditional levels of from three to 10 man-hours.

For 2003, “a lot of [SDI] customers are requesting yearly pricing at today’s levels,” said Busse. “The market for some time has been undersupplied,” said Busse of U.S. manufacturers who use steel. Busse said he does not see cold-rolled steel rising to $400 per ton next year, but nor does he see it falling to $250 per ton.

Despite some optimism, Busse is not certain 2003 will see better economic times. “The economy is in malaise,” he remarked. “It may well be a triple-dip recession,” said Busse. He noted that auto dealers are unwilling to continue offering vehicles at 0 percent financing. “If vehicle production goes down from 16.5 million units to 15 million, that will hurt the manufacturing sector. We’re being buoyed by the auto industry.”

Steel industry analyst Michael Locker of Locker Assoc., New York, predicted “a very slow economic recovery; not one of any significant strength. We’re not seeing major improvements in capital spending.”

Locker believes the uncertainty over the Iraq situation is part of the reason for the stalling recovery. He predicted that a noticeable recovery would be underway in the third quarter of 2003.

The iron and steel foundry industry has been in a longer-lasting decline than the steel industry, but 2002 may end up being the bottom of the trough.

Norman Bliss, a vice president with the American Foundry Society (AFS), Des Plaines, Ill., revealed an industry forecast that saw production of most foundry materials increasing between 2003 and 2005 after hitting historic lows in 2002.

Ductile iron, which is due to surpass gray iron as the largest foundry-made material by the end of this decade, is predicted to have a 2.3 percent growth trend throughout the decade. The amount of U.S.-made ductile iron is predicted to grow from 2 million tons in 2001 to nearly 5 million tons by 2010.

Shipments of gray iron have been in a downward trend since the early 1980s, as automakers have increasingly substituted ductile iron and cast aluminum for cast iron parts. The U.S. production of gray iron peaked at 15 million tons in 1965, declining to 5.1 million tons in 2001. The AFS-commissioned forecast sees annual production of gray iron staying in the 5 million tons range each year in the coming decade.

Bliss noted that ductile iron makers generally require higher-grade, cleaner shipments of scrap, a trend also noted by the EAF steelmaking executives in their industry.