2018 Steel Success Strategies: An optimistic message

When leaders from across the global steel industry convened in 2017 at the Steel Survival Strategies conference in New York, the tone was quite different than it was at the 2018 Steel Success Strategies conference, which was June 25-27 in New York City. Speakers at this year’s event, hosted by American Metal Market (AMM) Events, with headquarters in New York, and World Steel Dynamics (WSD), Englewood Cliffs, New Jersey, saw many reasons for optimism in the industry. John Ferriola, chairman and CEO of Nucor Corp., Charlotte, North Carolina, was among the first speakers to set the overall optimistic tone for the event, saying he had a message of “hope” for those assembled.

“Current market conditions are giving rise to great optimism,” Ferriola said, adding that steel demand could increase by as much as 2 percent in 2018.

He added that Nucor has been preparing for this opportunity throughout the last decade by reinvesting in the company.

Of the 24 end markets the company supplies, Ferriola said 21 are stable or improving, increasing orders and instilling a sense of optimism. He said most construction markets were good and the machinery and equipment sector looked “particularly good.”

Ferriola said, “It’s a good time to be making steel.”

2017 was Nucor’s best year since the downturn in 2008, he added.

Ferriola also mentioned the effect that trade laws have had on the steel industry, saying, “Governments around the world have called for market-driven reforms to global steel overcapacity. The inability to address this has led illegal subsidies to proliferate.”

He continued, “Now, everything is changing. America has stopped asking nicely and is now enforcing the law.” His comments were in reference to the Section 232 tariffs enacted by the Trump administration.  

While NAFTA (North American Free Trade Agreement) has been a success story for the U.S., Canadian and Mexican steel industries, Ferriola said steps can be taken to modify this agreement to benefit all three nations. Areas he cited as being ripe for reconsideration included rules of origin and the treatment of state-owned enterprises.

Ferriola said Nucor was investing in the next business cycle by moving up the value chain, acquiring complementary assets and expanding into underserved markets. He said the company was expanding its capabilities to produce more value-added products for automotive industry, adding that Nucor saw 7 percent growth in auto shipments in 2017 despite the fact that North American auto production declined slightly.

He also cited the benefits of diversifying its product line, adding that this move has made Nucor better able to withstand highs and lows of a given industry.

Regarding scrap availability, Ferriola said prime scrap will be a challenge in the future in light of declining U.S. manufacturing and improved production efficiencies. He also mentioned the increase in copper content in prime scrap over repeated recycling. He said this would give rise to a need for alternative scrap units, which is why Nucor has invested in DRI (direct reduced iron) production in Louisiana.

Nucor also is investing in two micromills that will produce rebar. One will be in Frostproof, Florida, in the central part of the state, east of Tampa. The company is investing $240 million in this electric arc furnace (EAF) facility. The other micromill will be in Sedalia, Missouri. Ferriola said these locations were desirable because they are in rebar consuming areas, which lends transportation cost advantages. The micromills also will help to free up capacity at the company’s existing minimills, allowing Nucor to make more merchant bar products, he said.

“I hope you all leave this room today feeling as strong as I do about the future of the steel industry,” Ferriola concluded.