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SteelOrbis All About Steel Training Workshop

SteelOrbis All About Steel Training Workshop. Thomas A. Danjczek President Steel Manufacturers Association San Diego, CA July 8, 2010. SteelOrbis Training. History of American Steelmaking. SMA Early 20 th century American steel

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SteelOrbis All About Steel Training Workshop

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  1. SteelOrbisAll About Steel Training Workshop Thomas A. Danjczek President Steel Manufacturers Association San Diego, CA July 8, 2010

  2. SteelOrbis Training 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?

  3. SteelOrbis Training SMA • 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

  4. SteelOrbis Training Where SMA Member EAFs are located…

  5. 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 facility Image by SMA

  6. SteelOrbis Training Early US Steelmaking Source – Stubbles, J.R. The Original Steelmakers. Iron & Steel Society, Warrendale, PA, 1984. 5, 33.

  7. SteelOrbis Training US Steel Production by Process In 2009 64% EAF

  8. SteelOrbis Training World Steel Production by Process In 2009 37% EAF

  9. SteelOrbis Training US Steel Production 1US Geological Survey

  10. SteelOrbis Training 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/

  11. SteelOrbis Training Set the Stage 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

  12. 2009 in a long term contextUS steel industry production changes Source: AISI, First River

  13. US raw steel capacity utilizationLong-term average is 78%, stable level is 85% 63% 48% 61% 65% Average Utilization Rates Periods of adjustment (red bars): 60% Periods of relative stability: 85% Source: AISI, First River

  14. Steelmaking Flowlines

  15. EAF Process Flow Diagram

  16. Flat Rolled Breakdown

  17. Long Product Breakdown

  18. SteelOrbis Training Top Global and North American Steel Producers - 2006 Source – Adapted from Metal Bulletin (March 12, 2007) for data on tonnage and global rankings.

  19. SteelOrbis Training Globalization and Consolidation Developments Have Dramatically Changed the NAFTA Steel Landscape Acquiring Company Acquiring Company Acquiring Company Acquired Company Acquired Company Acquired Company Arcelor Mittal Nucor Duferco/NLMK Arcelor Connecticut Steel Winner Steel Dofasco Trico Evraz Mittal Birmingham Ispat Inland Corus Tuscaloosa Oregon Steel Bethlehem ISG Worthington-Decatur Claymont Steel Marion Ipsco Canada LTV Nelson Steel US Steel Plate Weirton Severstal Harris Steel Auburn Steel Arcelor Mittal-Sp. Pt. Acme-Riverdale North Star Arizona Rouge WCI Georgetown American Iron Reduction Sicartsa Bayou LMP Steel & Wire Wheeling Pitt The David J. Joseph Co. (Scrap) CSN US Steel Gerdau Ameristeel Heartland Lone Star Sheffield Essar National Chaparral Algoma LTV Tin Co-Steel Minnesota Steel ISG IH#2 Pkl. North Star Stelco Sidetul Tultitlan Quanex Macsteel BlueScope Corsa IMSA Steelscape SSAB OAO TMK ICH/Grupo Simec Ipsco Plate (U.S.) Ipsco Tubular (U.S.) Republic Tenaris Steel Dynamics Ternium GalvPro-Jeffersonville Maverick Tube (U.S.) Hylsa The Techs Prudential Canada IMSA Roanoke Steel Hydril Company Steel of West Virginia Omnisource (Scrap) 1/1/09

  20. SteelOrbis Training 1970’s 2008 2010 Production Employment Technology Location Imports Profitability Average Price short tons 100-140 million tons 100 million tons 80 million tons, 63 in 2009 Approx. 700,000 12 MH/ton (1978 – 449,000) <120,000 (Minimills @ 60% - approx. 40,000, <2MH/ton) 100,000 <20% casters <10% EAF 95% casters 60% EAF + NW, SE, Rust Belt (near customers, and cheap power) Primarily Rust Belt & a few scattered Approx. 15% Approx. 25% (peak @ 35%) 20% Poor Good Marginal $605 $1000??? $600

  21. SteelOrbis Training • 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

  22. SteelOrbis Training U.S. Foreign Trade In Steel Products (Million Net Tons)-Life in the ‘60 Source – AISI, “The Steel Import Problem.” New York, NY. 1968. Page 6.

  23. SteelOrbis Training Crude Simple Estimate – Long Products

  24. SteelOrbis Training Employment in the U.S. Steel Industry Source – U.S. Department of Labor. Bureau of Labor Statistics.

  25. SteelOrbis Training Trade Cases • 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. • 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 • Antidumping/Countervailing Cases • 201 Safeguard (2001)

  26. SteelOrbis Training Trade Update

  27. SteelOrbis Training Trade Update

  28. SteelOrbis Training Trade Update

  29. 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 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. 9 million cars and trucks produced 1982 Source: Ward’s Automotive.

  30. The U.S. Construction Market Remains Weak U.S. Single-Family Housing Starts, Q1 2004 through Q4 2009 • 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: U.S. Census Bureau.

  31. Global Steel Capacity Continues to Increase World Crude Steel Capacity 2000-2012 World Crude Steel Capacity CAGR 2,055 2,100 20 1,997 1,917 1,816 1,850 1,654 1,583 1,600 1,453 15 1,356 1,350 1,245 1,170 1,095 1,062 1,062 1,100 Current Average Growth Rate (CAGR) 10 Steel Capacity (million metric tonnes) 850 600 5 350 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(e) 2011(e) 0 SteelOrbis Training 2012(e) Source: Worldsteel

  32. SteelOrbis Training Crude Steel Supply in China, 2005-2009 (million metric tons) Source: Growell Research, “China Steel Capacity Forecast for 2006-2010” and CISA Presentation at OECD, December 15, 2008.

  33. In 2008 China Was Responsible forOver Half of the U.S. Indirect Steel Trade Deficit 53.5 Sources: US Department of Commerce for trade $ balances; AISI estimates for indirect steel trade

  34. Over the Last Three Years, China’s Increase In Steel Production Far Exceeded Total 2009Steel Production In Both Japan And The United States Increase in Chinese Crude Steel Production 2006-2009 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.

  35. Last Year, China Accounted for Almost Half of Total World Crude Steel Production Chinese crude steel production as a percentage of total world production China’s crude steel production Source: World Steel Dynamics, Inside Track # 77 (May 30, 2007); World Steel Dynamics, Inside Track # 102 (Jan 15, 2010).

  36. SteelOrbis Training U.S. Scrap Consumption and Exports 2009 – Exports 22.3mt Imports (e) 3.0mt U.S. Consumption 48.0mt

  37. SteelOrbis Training The Worldsteel Short Range Outlook Source: Worldsteel Economic Studies Committee, April 2010

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