1 / 15

Steel – Global Impacts to North American Minimill Competitiveness

SBB Steel Markets 2007. Steel – Global Impacts to North American Minimill Competitiveness. Thomas A. Danjczek, President Steel Manufacturers Association March 20, 2007. In March 2007, The Times they are a’changing…. SBB Steel Markets North America 2007. Steel Demand Fluctuating. Trade

portia-dennis
Download Presentation

Steel – Global Impacts to North American Minimill Competitiveness

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. SBB Steel Markets 2007 Steel – Global Impacts to North American Minimill Competitiveness Thomas A. Danjczek, President Steel Manufacturers Association March 20, 2007

  2. In March 2007, The Times they are a’changing… SBB Steel Markets North America 2007 Steel Demand Fluctuating Trade Imbalance Consolidations 59% EAF in U.S. Service Center Inventories Down Slightly Energy Costs Non-Production Costs Democratic Congress World Steel Growth China’s Subsidies China’s Steel Growth Perennial Problems U.S. Government Debt Investor’s Views Scrap Costs Greenhouse Gases

  3. SBB Steel Markets 2007 Investor’s View Summarized from Aldo Mazzaferro’s, Goldman Sachs, Presentation to SMA Board of Directors, 2/16/07: • Sustainability is key • Discipline = Confidence = Higher Valuations (Investors fear volatility and surprises from rapidly changing prices, supply swings, unpredictable earnings) • Key questions going forward: -Will discipline hold long-term, and will it be global? -Will higher U.S. prices trigger large import response? -What are the long-term risks from of increased capacity in other markets? -Will China’s production continue to expand its supply over demand?

  4. SBB Steel Markets 2007 Scrap Demand EAFs have grown to 59% of U.S. steel production. Source: DJJ, 2/07

  5. SBB Steel Markets 2007 Excess Burden of Structural Non-Production Costs onU.S. Manufacturers Relative to Major TradingPartners, 2005(U.S. dollars per hour worked) Source: Jeremy A. Leonard, The Escalating Cost Crisis, Manufacturers Alliance/MAPI and NAM, 2006

  6. SBB Steel Markets 2007 CHINA!

  7. SBB Steel Markets 2007 China Facts • China trade surplus swelled to $177 billion in 2006 – up 74% over 2005 • China trade surplus in 2001 (WTO joining year) was $22 billion • China currency has only changed by 5.9% since July 2005

  8. SBB Steel Markets 2007 China Facts, cont.

  9. China Facts, cont. SBB Steel Markets 2007 China Has the Most Heavily Subsidized Steel Industry in the World $7.5 billion in debt-to-equity swaps in 2000 State-owned enterprises account for 57 percent of total Chinese production An additional $6 billion in announced subsidies during 2000 Chinese steelmakers regularly obtain preferential loans from state-owned banks 2005 steel policy commits China to further subsidies, micromanagement Manipulation of key raw materials markets, including coke and ferroalloys Inadequate protection of workers’ rights and enforcement of environmental standards Support from local and provincial governments uncontrolled by central government Chinese steel producers enjoy government assistance with energy and other input costs

  10. SBB Steel Markets 2007 China Facts, cont.

  11. SBB Steel Markets 2007 China Facts, cont. Within the Last Year, U.S Producers Have Been Hit with a Flood of Chinese Imports Total U.S. Imports from China U.S. Imports of Critical High-Value Products Source: AISI and IM-145 data

  12. SBB Steel Markets 2007 Aggressive Policy Measures Are Necessary to Prevent China from Causing a Major Crisis • Enact real China legislation (apply CVD law to China, address currency manipulation, WTO reform) • • Strict enforcement of U.S. AD/CVD laws (appearance at HR hearing, letters, Congressional hearings) • • Make clear that Congress will not accept any new agreements (Doha, Korea FTA, etc.) with trade law weakening

  13. SBB Steel Markets 2007 But, It’s Not China Alone

  14. SBB Steel Markets 2007 Greenhouse Global Gases • Effective Climate Change Policies must promote low carbon intensive technologies • Cap & Trade programs are a failure due to demand destruction (Ask the EU guys!) • Making steel in countries not subject to greenhouse global gas program is NOT a solution. Global problems require global solutions.

  15. SBB Steel Markets 2007 Conclusion -Need aggressive policy measures to prevent China from causing a major crisis -It’s still a cyclical business (percent utilization, scrap, inventories, etc.) -Still no Global Subsidies Agreement – massive subsidized growth continues -Greenhouse global gases require a global solution! -When will inventories return to normal levels? -Consolidation will continue -China! China! China! (everything else is only an embellishment) -Unknowns (interest rates, housing starts, economic growth, imports, customer base, pricing???)

More Related