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2014: A year for the “littlethings”
nother New Year, another whirlwind of outlooks, forecasts, speculation and educated guesses. It seems as if everyone always has a solid opinion on how the steel industry will fare once the confetti falls and the champagne flattens. But there seems to be a diﬀerence this year—instead of widespread concern as to whether this year will finally be the year of recovery for the steel industry (and global economy overall), the doubt and fear have finally lifted. Instead of wondering if they’ll make it through this year without closing up shop, most steel-related companies finally have the luxury to only worry about the little things. Of course, some little things aren’t so little. ere are still major developments underway, most notably the US antidumping/countervailing trade case against rebar imports from Turkey and Mexico. As with yearly outlooks, everyone along the supply chain has an opinion on how the case will—or should—get resolved. Our cover story on page 34 delves deeper into the brief history and potential future of the case.
Forecasts for long products will be even more pervasive during SteelOrbis’ next event, the ever-popular Rebar & Wire Rod Conference during the World of Concrete expo in Las Vegas this January. If you can’t make it to the actual event, stay tuned for recaps on SteelOrbis.com—with a distributor, industry association representative, trade lawyer, and the chairman of the Turkish Steel Exporters Association on the stage, sparks are sure to fly and strong words will no doubt be exchanged. For a more comprehensive view on what 2014 has in store for the US rebar market, check out Prime’s interview with Frank Bergren, Managing Director of Metal Partners Rebar, on page 20. For a wider look into the worldwide longs market, be sure to peruse the host of other interviews in this issue, many taken during the SteelOrbis Fall 2013 Conference & 69th IREPAS Meeting in Istanbul in September. e overall sentiment seems to be on the bullish side, but obstacles still abound to pre-crisis levels of prosperity. And if looking ahead gets to be too much, take a retrospective look back at last year’s
Most Likely list in the Steel Scope article on page 40—did predictions for certain steel companies in 2013 come true? Whatever is most appealing to you—looking back or forward—the one area everyone can aﬀord to look is around. e New Year also means new resolutions—what are your plans to improve your own corner of the steel industry this year? Most resolutions, like going to the gym and quitting smoking, are meant to be broken, but business goals have an underlying motivation that isn’t as easy to dismiss. A better, stronger business means a better, stronger steel industry when everyone is working toward their resolutions. And if you haven’t made any yet, it’s never too late. With warm regards,
14 How will Mexican steel fare in 2014?
Rebar in the spotlight
Where are they now? Assofermet Day
Aceros Noticias / Mexico’s outlook for 2014 SteelOrbis’ Mexican correspondent highlights issues of concern and hope
Cover Story / REBARPOCALYPSE Is the landscape for rebar imports in the US is about to get bleak?
Events / Assofermet Day SteelOrbis’ newest annual conference launches with a bang in Brescia
Steel Scope / Where are they now? An update on last year’s Most Likely list
Interview / Rebar in the spotlight Frank Bergren, Managing Director of Metal Partners Rebar, oﬀers forecasts for the market
Volume 7; Issue 1
Editor’s Corner / Hoarders: Wall Street Edition A case for “recycling” wealth
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44 Interview / Quality vs. Quantity Cyril Broussaud, Head of Ferrous Sales of the leading recycling specialist and scrap supplier Ecore Group, discussed Turkey’s growing demand for quality scrap with SteelOrbis Istanbul
45 Interview / Envisioning the future of exports Fadi Hraibi, chief commercial oﬃcer of Ukraine-based Interpipe, explained to SteelOrbis Istanbul the company’s vision regarding the steel billet market after commencing sales of the product in October
46 Interview / Higher inputs, lower outputs Dr. Veysel Yayan, general secretary of TCUD, explained the eﬀect of declining steel output caused by higher input costs to SteelOrbis Istanbul
52 Interview / Margins under pressure SteelOrbis Istanbul spoke with Ugur Dalbeler, CEO of Turkey’s Colakoglu Metalurji, about his tenure as chairman of IREPAS as he handed over his duties to Kim Marti of Celsa
61 Interview / Sink or swim SteelOrbis Shanghai speaks with Leon Li, Research Director at STEELEASE, about new developments in the Chinese steel market that will have the most influence in 2014 6 Steel News 8 Market Analysis 17 Steel in Film 18 Bull & Gloom 28 Light Gauge Stories 30 World Economic Report 41 Construction Roundup 42 Events 47 Steel Marvels 48 WSD Strategic Insights 50 Supply Lines 54 Trade Law Watch 57 Fabricator’s Corner 60 Crossword 63 Price Reports
Prime is published by SteelOrbis Elektronik Pazaryeri A.S. Mustafa E. Say Director Murat Eryilmaz
Editorial Director Burcak Odabasi
Editor-in-chief Katie Memmel
GM - Americas Brock Watson
Editors Margie Palmer, Michelle Mowad, Baris Yarsel, Çağan Orhon, John Fitzgibbon, Luca Veronesi Editorial Headquarters United States 832 Camino Del Mar Ste 2 Del Mar, CA 92014 Turkey Ataturk Cad. Seref Yazgan Is Merkezi No: 72/18-19 Kat 7 Kozyatagi/ Istanbul Designed by SteelOrbis US
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USA: +1 (713) 589-6049 Italy: +39 (030) 376-2340 China and Far East: + 86-21-5385 3535 Turkey: +90 216 468 10 50 E-mail: firstname.lastname@example.org Advertise: email@example.com Website: www.steelorbis.com e points of views expressed in the articles in Prime are those of the authors. Questions may be made by indicating sources. Prime is distributed to SteelOrbis subscribers free of charge.
Volume 7; Issue 1
SteelNews Ford to replace steel components with aluminum in best-selling vehicle According to news reports in early January, Ford Motor Co. is planning to replace many of the steel components in its F-150 pickup truck with aluminum components in an eﬀort to improve fuel eﬃciency. e F-150, which is the company’s bestselling and most profitable vehicle, will lose 400 lbs. in the switch, according to automotive trade press and a CNN report (Ford has not oﬃcially announced its plans). Along with other streamlining eﬀorts, the new version of the truck will increase its fuel eﬃciency to 30 miles per gallon, compared to the 17-19 mpg of current models. However, the aluminum parts will add about $800 to the cost of production. Reportedly, the truck’s frame and cargo bed will remain steel.
Indiana steel fabricator destroyed in fire According to local news reports, Hammond, Indiana-based Midwestern Steel Fabricators was destroyed by a December 16 fire that lasted almost 12 hours. Causes for the fire are still under investigation. No one was injured in the blaze, but the extent of the fire coupled with the amount of water used to fight the flames has resulted in a total loss of the building, according to the fire chief.
ArcelorMittal’s Harriman plant to reopen ArcelorMittal executives announced January 2 the company’s plans to reopen its Harriman, Tennessee steel plant, which closed in 2011 due to poor market conditions. In a joint announcement with Tennessee Economic and Community Development Commissioner Bill Hagerty, the facility should resume full operation by April 2014, requiring 61 new employees over the next two years.
e company will ship billets from its facility in LaPlace, Louisiana where they will be reheated and rolled into merchant bar and other light structurals. Additionally, the plant will start producing one- to three-inch angles and one- to four-inch flats, expanding ArcelorMittal Long Carbon North America’s oﬀerings.
Mexican mining alliance warns CO2 tax will eliminate almost half a million jobs In mid-October, Mexican National Mining Alliance warned that approval of the tax on coal production and carbon dioxide emissions would threaten to eliminate 400,000 direct and indirect jobs in the steel industry. Union leaders interviewed federal legislators to expose the risks inherent in the adoption of this tax calling on Congress to not approve that part of the tax reform initiative. ey explained that in two meetings deputies and senators of the Institutional Revolutionary Party (PRI) indicated that there will be no going back on the proposal submitted by President Enrique Pena Nieto. According to the proposal, with the creation of new Special Tax on Production and Services Coal, the government will charge US$5.80 per ton of coal produced, in addition to US$14.60 per ton of emission carbon dioxide. Union leaders mentioned that the steel companies would be primarily aﬀected by the initiative, since this mineral used as basic raw material in the production of steel. e tax is considered by many to be unfair and inequitable as collecting the tax would hurt many sectors, especially Chihuahua’s economy, from which 95 percent of the country’s coal is produced. In addition, 500,000 people depend on mineral extraction for their livelihood. One of the steel companies would be affected by this initiative is Altos Hornos de México (AHMSA)—based in the northern Volume 7; Issue 1
state of Coahuila and providing approximately 80 percent of the existing coal in the country.
US court upholds judgment in favor of AK Steel in ArcelorMittal patent case AK Steel announced October 29 that the United States District Court for the District of Delaware again confirmed that the company’s ULTRALUME® advanced highstrength steel product did not infringe upon an ArcelorMittal patent. e Court granted summary judgment in favor of AK Steel on October 25, 2013. e Court further concluded that ArcelorMittal’s patent was invalid due to ArcelorMittal’s deliberate violation of a statutory prohibition on broadening a patent through reissue more than two years from the grant of the initial patent. AK Steel’s ULTRALUME® advanced high-strength steel helps automakers design lighter, more fuel-eﬃcient vehicles without sacrificing occupant safety. e product has been accepted for use by numerous automotive original equipment manufacturers, and is used for hot-stamped, press-hardened applications.
Canada finds injury in HR steel plate imports from seven countries On November 5, the Canadian International Trade Tribunal (CITT) determined there was a reasonable indication that the dumping of hot rolled (HR) carbon steel plate from Brazil, Taiwan, Denmark, Indonesia, Italy, Japan, and South Korea had caused injury or is threatening to cause injury to the domestic industry. Canada launched the antidumping duty investigation for hot rolled carbon steel plate from the abovementioned seven countries in September 2013 upon a complaint made by Essar Steel Algoma Inc., of Sault Ste. Marie, Ontario.
AISI applauds passage of bill to maintain US state authority of shale oil and gas production On November 22, the American Iron and Steel Institute (AISI) applauded the US House passage of a bill allowing states to continue to make their own decisions about the regulation of shale oil and gas production. omas J. Gibson, president and CEO of AISI, said that H.R. 2728, the Protecting States’ Rights to Promote American Energy Security Act which passed by a vote of 235187, would maintain state predominance in the regulation of shale oil and gas production—which the steel industry supports. “e discovery and production of shalebased oil and natural gas is leading to significant investment, plant expansions and job creation in manufacturing sectors across the US economy—including in steel,” Gibson said. “Expanded production of aﬀordable natural gas is providing markets for steel pipe and tube products that are essential to the production and transmission of oil and natural gas, and the steel industry is also developing new options and technologies for the
production of steel that maximize the use of natural gas. Keeping up the momentum on this resource is critical in enabling international competitiveness for our industry.” Gibson said the shale and natural gas renaissance is being threatened by proposed new federal regulations, which would add federal Bureau of Land Management lands rules on hydraulic fracturing and horizontal drilling to many existing current state regulations. “ese new federal regulations would be a one-size-fits-all approach that hinder the economic and energy benefits we are seeing from shale oil and gas production,” he said. “By allowing state-based approaches, the economic and energy benefits from domestic shale resources will continue to be realized.”
Project connecting Prospect, Ky., and Utica, Ind., which is also estimated to cost $1.3 billion. Of the two bridges involved in the Downtown Crossing project, one bridge will be built to carry six lanes of northbound Interstate 65 traﬃc between Louisville and Jeffersonville, Indiana. e John F. Kennedy Memorial Bridge, which today carries all I65 traﬃc, will be rehabilitated and reconfigured to carry only I-65 southbound traﬃc on six lanes. e Kennedy Interchange, where three major highways, I-65, I-64 and I-71, come together in downtown Louisville, will also be rebuilt to improve access and eliminate design deficiencies and safety hazards.
US DOT approves $452 million loan for Kentucky/Illinois bridge project On December 13, US Transportation Secretary Anthony Foxx announced a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan for $452 million to finance the Downtown Crossing section of the Louisville and Southern Indiana Ohio River Bridges Project. e cost of the Downtown Crossing, which Kentucky is funding, is roughly $1.3 billion, and it represents one half of the bistate Ohio River Bridges project, which also includes the new East End Bridge, also spanning the Ohio River eight miles to the north. Indiana will finance the East End Crossing
US DOC votes to keep AD/CVD orders on certain wire rod imports e US Department of Commerce (DOC) made its final determinations on Oct. 23 in the expedited sunset reviews of the antidumping orders on carbon and certain alloy steel wire rod from Brazil, Indonesia, Mexico, Moldova, Trinidad and Tobago, and Ukraine. As expected, the DOC found that revocation of the orders would be likely to lead to the continuation or recurrence of dumping. SO \
Argentina’s mining investments to grow in 2014 On December 11, Argentinean oﬃcials said they expect investments in the mining sector to total US$3.855 billion in 2014. “Next year the mining sector in our country will invest over US$3.855 billion to start construction of new projects, continue existing project, optimize production projects and pursue mineral exploration,” said Argentina Mining Secretary Jorge Mayoral. “e industry will continue to grow steadily and 2014 constitute a new record of investment.” He also said that in the last decade, mining projects in Argentina grew from 18 to 700, and jobs in the sector grew from 79,000 to 500,000.
Volume 7; Issue 1
US Steel plant explosion kills one worker, injures two others A December 17 explosion at US Steel’s Great Lakes Works near Detroit, Michigan on Sunday killed one worker and injured two others. An autopsy performed Monday on the victim, Antonino Palazzolo, 31, indicated the cause of death was smoke and soot inhalation. e Michigan Occupational Safety and Health Administration was charged with investigating the incident, and would determine whether the company was in compliance with MIOSHA regulations. A spokeswoman with the Department of Licensing and Regulatory Aﬀairs, the oﬃce that oversees MIOSHA, said the plant has been inspected twice in the past four years, but no citations were issued. Although the explosion temporarily interrupted steelmaking operations, the plant resumed production by the following night.
Jersey Shore town to build $40 million steel sea wall In the first week of December, municipal engineers in Mantoloking, New Jersey, one of the towns hit hardest by Hurricane Sandy, told local news outlets that construction of a $40 million steel sea wall could start early next year. e bidding process to find a contractor for the $40 million project was slighted to begin by the end of the month, and if the schedule goes as planned, construction work would start in mid-January and be completed around June. e proposed wall will run for the entire length of Mantoloking and neighboring Brick Township; two Ocean County communities that have received federal and state approval for the wall, which will be covered by sand to form the base of a dune system. However, the sea wall is intended to only oﬀer temporary protection; an extensive beach-widening and dune construction project is being planned by the US Army Corps of Engineers.
Bumpystart to the New Year RAWMATERIALS
Harsh winter storms lift US scrap prices despite holiday-related slow activity Price firming was seen with in the US domestic scrap market in early November with East Coast and Midwest prices increasing between $25-$30/lt in the previous two weeks. East Coast ranges crept up to $360-$370/lt for HMS I, $390-$400/lt for shredded and $415-$425/lt for busheling, and scrap dealers said the uptick was largely tied to increased demand within the US domestic and export markets, compounded with dwindling supply. A similar situation was seen in the Midwest, where prices increased $30/lt since late October. HMS I was transacting in the approximate range of $380-$390/lt, shredded firmed to $390-$400/lt and busheling leveled out at approximately $420-$430/lt. Midwest dealers said there would continue to be a limited flow of shredded and HMS scrap through the first part of 2014, placing the forecast at neutral to firm. As such, sources told SteelOrbis that steel mills would likely not find much resistance to raw material-backed price increases in the near term, especially in the long product sector. Scrap prices throughout the US Midwest held steady through the rest of November, as most mills replenished their inventories with buys made early in the month. Prices in Chicago remained unchanged for HMS I in the approximate range of $380-$390/lt, $390-$400/lt for shredded and $420$430/lt for busheling. Scrap dealers said prices in the Ohio Valley also trended sideways and remained at $370/lt for HMS I, $380/lt for shredded and $425/lt for busheling. Buys for December were not expected to be substantial, especially in light of the Christmas holiday. Meanwhile, mill-delivered prices on the East Coast were also unchanged since early November. As with the Midwest, mills were not expected to buy heavy in December—
inventory levels were already slightly up, and they were keeping a close watch on year-end levels. Additionally, dealers described scrap flow as being decent, all of which placed the East coast scrap price forecast for December at neutral as well. By early December, Ohio valley prices for shredded and busheling scrap firmed by approximately $15-$20/lt, as a pummeling, slow-moving snowstorm in the central portion of the country all but halted scrap collection eﬀorts. Dealer sources said that obsolete grades and shredded scrap became more scarce, although busheling seemed to be readily available. Pittsburgh/Cleveland prices for HMS I continued to hold at $380$390/lt, although shredded and busheling scrap firmed to the approximate ranges of $415-$425/lt and $430-$440/lt, respectively. P&S grades were also available in the range of $410-$420/lt. East Coast prices, however, did not waver. Prices for HMS I continued to hold, as did the ranges for shredded and busheling. Prices within the South were also strong, at $400$410/lt for shredded and $425-$435/lt for busheling. Dealer sources said they did not expect a lot of activity during the month due to the year-end holiday season, but consumption levels were described as “healthy”. Although current prices were expected to hold steady throughout the month, mills who jumped late with their purchases may have found themselves paying slightly more. Near the end of December, scrap dealers in the Southern US expected that prices for HMS I, shredded and busheling would tick upward for January buys, and the market could be up anywhere from $10-$20/lt across the board, with prices for shredded expected to settle at $410-$420/lt and busheling in the approximate range of $435$445/lt. Mills who made mid-month buys paid up slightly from levels seen during the first part of the month, and with order books improving and steel prices holding firm, Volume 7; Issue 1
dealer sources expected a flurry of purchases once the year-end holidays concluded. Meanwhile, East Coast prices in the Philadelphia region for HMS I were steady at $340-$350/lt, while shredded and busheling ranges remained at $390-$400/lt and $410-$415/lt, respectively, but that market was also expected to be up $15-$20/lt come January. Intake in the North East was terrible, according to dealer sources, who point out that snowstorm after snowstorm placed a huge damper on scrap collection. A similar trend is expected for the Ohio valley. Although prices for HMS I, shredded and busheling scrap have held in the approximate ranges of $380-$390/lt, $415-$425/lt and $430-$440/lt, respectively, January prices were forecasted to settle up between $10$15/lt as well. As of the beginning of the New Year, activity within the East Coast and Ohio Valley scrap markets quieted down after many chose to extend their holiday vacations. But once everyone returned to work, the January trend was expected to settle sometime during the first week of the year. SteelOrbis sources confirmed that 45,000 lt of shredded scrap was sold on the East Coast at approximately $415/lt just before the New Year, reflecting an approximate $15/lt increase from buys in December. is would likely set a tone for January buys, which meant the mid-December forecast continued to hold that East Coast prices within the Philadelphia region, previously at $340-$350/lt for HMS I, $390-$400/lt for shredded and $410$415/lt for busheling, would increase by approximately $15-$20/lt for January. Meanwhile, activity within the Ohio Valley was also light due to the year-end holiday period. December prices for HMS I, shredded and busheling scrap, at $380-$390/lt, $415-$425/lt and $430-$440/lt, respectively, were still projected to settle up between $10-$15/lt in January. Dealer sources, however, pointed out that the Polar Vortex
Turkish scrap purchases slow down as 2013 comes to a close In the last days of December, SteelOrbis learned from market sources that ex-Black Sea A3 grade scrap oﬀers to Turkey were finding support—ex-Black Sea transactions in Turkey concluded at price levels as high as $400/mt CFR. Sources reported that Romanian A3 scrap oﬀers to Turkey’s Marmara region were available at $385-$390/mt CFR, while ex-Russia A3 scrap oﬀers to Turkey are still at $390-395/mt CFR. After Turkish mills showed greater interest in ex-Black Sea scrap in the 51st week of the year and concluded many transactions, in the last week of the year the market was quiet in terms of new bookings. In the last week of the year, import scrap purchases slowed down in Turkey. Having concluded scrap deals in the previous week from the Mediterranean region and St. Petersburg, it was thought that Turkish steelmakers might look at short sea scrap oﬀers for new transactions in the coming period, given the higher deep sea scrap prices. Ex-US scrap oﬀers reached $410$413/mt CFR, while Turkish producers, who were experiencing tighter profit margins, were not in a rush to conclude import scrap bookings for their January stocks as no improvement was registered in their finished steel export activity. In the meantime, it was thought that import scrap prices would likely remain strong due to the upward trend of scrap prices in the local US market and expectations for this price movement to continue in the coming period. An ex-St. Petersburg A3 scrap deal, meanwhile, was concluded in Turkey at price levels of $390-$395/mt CFR, while a booking for Romanian scrap was concluded in Turkey at $385-$390/mt CFR. Scrap supply shortages still prevailed in the Black Sea region, but it was very likely that Turkish mills would continue to evaluate short sea scrap oﬀers in the days ahead. Overall, foreign scrap suppliers withdrew their oﬀers for the time being, while they
would give oﬀers again in January, when they were expected to ask for higher prices. On December 26, market sources indicated that ex-Lebanon HMS I/II 80:20 scrap oﬀers to Turkey were ranging at $370-$380/mt CFR, indicating an increase of $5-$10/mt since previous week. Given the strong deep sea scrap oﬀers, exLebanon scrap prices for Turkey moved up, while no ex-Mediterranean scrap transactions were heard in the week in question in Turkey. However, it was stated that Turkish steelmakers were evaluating ex-Mediterranean scrap oﬀers and new bookings were expected to be concluded in the coming days. Import activity accelerated in the Turkish scrap market with the arrival of the New Year, with mills seeking to purchase for their January stocks. e latest import transaction prices for HMS I/II 80:20 scrap were in the range of $395-$405/mt CFR as of January 7. Most Turkish steelmakers had to reduce their production levels due to higher raw material costs. Meanwhile, no ex-US HMS I/II 80:20 scrap deal was heard in Turkey for some time, although with the support of strong US domestic prices, ex-US scrap oﬀers would likely move upward during January. In the meantime, political tensions in Turkey prevented the local market from gaining stability, while the further appreciation of the US dollar against the Turkish lira also caused Turkish buyers to remain cautious, though new import scrap deals would likely to be completed in Turkey in the second week of January. On the other hand, there was some activity in terms of short sea scrap transactions in Turkey, though it was not so lively. An exRomania A3 scrap deal was concluded in Turkey at levels of $383-$384/mt CFR, while an ex-Russia A3 scrap booking was concluded at $390-$391/mt CFR.
750,000 mt of ship scrap produced in Turkey in 2013 In the first week of December 2013, improvement in prices in the Turkish scrap market created expectations of upticks in the local pig iron market. In addition, increases of $5/mt in the iron ore market in the week Volume 7; Issue 1
in question also contributed to these expectations. However, no upticks were seen so far in pig iron transaction levels. Ex-Ukraine pig iron oﬀers were varying in the range of $390$395/mt FOB, though it was possible to see deals concluded by as much as $5/mt below these levels. SteelOrbis learned from market sources that pig iron demand in the Middle East remained on the strong side and plenty of pig iron transactions were concluded in the region, particularly in Egypt, in the last days of November and first days of December. It was expected that the New Year holidays and the harsh freezing weather conditions in the CIS would likely impact the pig iron markets negatively for the next two to three months. On the other hand, SteelOrbis learned from market sources that in Turkey’s Aliaga region—the only region in Turkey where ship scrapping is allowed—ship scrap prices remained unchanged on weekly basis as of December 6 at $380-$385/mt ex-yard, while sources stated that demand was decent in the local market. Meanwhile, 216 ships were brought to Aliaga port to be scrapped since January 1, 2013, with approximately 750,000 mt of scrap being obtained from these ships.
Chinese scrap prices stablize in early winter During the week ending December 17, prices of steel scrap in China were mostly stable, though prices in eastern China indicated slight decreases. Transaction activity remained at medium levels, and in the given week, some steel scrap prices in eastern China trended down slightly due to reduced purchasing activity by mills in the region, while mills in other regions and scrap traders were seeking to keep prices stable amid the unchanged demand situation. In the week in question, the prices of semi-finished steel in certain regions of China indicated some upward movement, which was thought to perhaps provide some support for scrap prices, though it was thought that Chinese domestic steel scrap prices would likely move on a slight downtrend in the coming weeks as steel mills start to purchase just in line with their needs.
winter storm packed a wallop, and because of this, prices could settle up slightly higher than initially anticipated.
US rebar market competition heats up with strong scrap and weakened imports After Gerdau Long Steel North America issued a $1.00 cwt. ($20/nt or $22/mt) transaction price increase in early November, many in the US domestic rebar market assumed that Nucor would follow suit with either an identical increase, or perhaps a larger increase to take advantage of uptrending scrap prices and solid demand. But in an unusual move, Nucor announced a meager $0.50 cwt. ($10/nt or $11/mt) price increase the following week, joined soon after by Steel Dynamics, Inc. While many sources hoped Gerdau would stand their ground and keep their higher increase in place, others said executives were already discussing whether to adjust it to remain competitive. In the meantime, spot prices were in limbo—the general consensus seemed to be that spots were up at least $0.50 cwt. from last week, bringing the range to $32.50-$33.50 cwt. ($717$739/mt or $650-$670/nt) ex-mill as long as the remaining $0.50 cwt. from Gerdau was up in the air. Until the domestic price situation was sorted out, imports were still a viable option despite the ITC’s early ruling that Turkish and Mexican rebar caused injury to the US market, thus moving the trade case forward. Many traders continued to oﬀer rebar from both contested sources, even as their price trends pointed up. Turkish mills already raised their rebar oﬀers to the US, and while the increase did not make its way into the US import sales price range of $30.00$31.00 cwt. ($661-$683/mt or $600$620/nt) DDP loaded truck in US Gulf ports, considering the US domestic trend, an uptrend would soon become apparent. Mexican oﬀers were also stable at $30.00-$31.00 cwt. DDP loaded truck delivered to US border states, as were oﬀers from Korea at $32.00-$33.00 cwt. ($705-$727/mt or $640-$660/nt) DDP loaded truck in West Coast ports. As expected Gerdau issued another letter to customers after Nucor’s announcement informing them that they would stand behind their original $1.00 cwt. ($20/nt or $22/mt) increase instead of caving to Nucor’s
$0.50 cwt. ($10/nt or $11/mt). As such, spot prices increased by another $0.25 cwt. ($5/nt or $5.50/mt), and the remainder of Gerdau’s increase was expected to permeate the market by the beginning of December, when Nucor would likely announce an additional $0.50 cwt. increase—at the very least, although up to $1.00 cwt. was probable, according to sources. However, with domestic demand strong and import activity lagging, there was hope that the rest of the increase could be pushed through before then. e determination of Gerdau to stick by their higher rebar price increase led to another small jump in the spot market, with the new range of $33.00-$34.00 cwt. ($728$750/mt or $660-$680/nt) ex-mill finally reflecting Gerdau’s full $1.00 cwt. ($22/mt or $20/nt) increase. Further, sources told SteelOrbis that the uptrend showed no signs of abating, despite an early neutral outlook for scrap prices in the coming month. Meanwhile, alternative import sources such as Korea and Portugal lost the excitement of their novelty in the US, and traders reported little to no bookings for the time being. However, once the trade case against Turkey and Mexico moved along, that disinterest was expected to turn around. Elsewhere in the import market in December, attractive import deals for Turkish rebar to the US market cropped up, primarily to “fill holes” in ships already destined Volume 7; Issue 1
for US shores. Traders reported that they had been oﬀered varying deals on the CFR price, but they were wary about arrival times in the US—they didn’t want to book anything that would come in past February, when the US Department of Commerce announces its next ruling on the current AD/CVD case against Turkish and Mexican rebar. erefore, while deals were available, traders were not making substantial buys. en, once US rebar producers filed the “critical circumstance” allegation against Turkey and Mexico—meaning retroactive duties could be applied—order inquiries from those sources all but dried up. As for tonnage currently in transit to the US, traders told SteelOrbis that they were worried about unloading positions, and if they got desperate there could be some majorly attractive deals available at the port. Nevertheless, US mills were reportedly not concerned with import rebar’s potential “swan song” pricing with tight production schedules, steady demand, and rising raw material costs in their corner. In the second week of December, Nucor announced a rebar price increase of only $10/nt ($0.50 cwt. or $11/mt)—even though most predictions averaged around $20/nt. However, it was not expected to be the last increase of the year. Sources told SteelOrbis that while Nucor could have asked for more, they were choosing to dole out increases in “small bites” to keep inventory lev-
Mexican rebar and wire rod see diverging trends in winter Optimism was high in the Mexican domestic wire rod market in mid-November, as local prices soared by $60/mt to reach $779/mt ex-mill. e boost was largely attributed to the announcement of the “Guerrero Plan”—President Enrique Peña Nieto’s proposal for the reconstruction of houses, buildings, roads and infrastructure damaged by hurricanes Manuel and Ingrid. However, the trend was not shared with the Mexican
rebar market, as extensive oversupply puts pressure on prices. Rebar prices at the time of wire rod’s boost were $636/mt ex-mill, reflecting a $65/mt plunge from prices two weeks before. By many accounts, rebar producers had an idle capacity of 2.5 to 3 million tons of rebar. Within the month, Mexican wire rod prices continued to increase, this time by a more moderate $15/mt. Rebar prices, meanwhile, continued to decline, decreasing by $15/mt in a matter of weeks. Despite the oversupply situation, sources told SteelOrbis that if energy reforms and other policies came into eﬀect to further boost the construction industry, the increase in demand could overcome supply issues. Just weeks later, Mexican rebar prices finally reversed trend, jumping $40/mt to reach the level of $661/mt ex-mill. Wire rod prices also stayed firm, increasing by $20/mt in early December and $6/mt in mid-December. As the year came to a close, rebar prices remained stable—while the final weeks of the year were marked with very low ordering levels, construction industry sources told SteelOrbis that 2014 would be a year of great opportunity for their sector, in both public and private activity, and Mexico would soon be among the top 20 countries in the world for competitiveness in infrastructure. Turkish rebar mills start 2014 with focus on their local market With the US dollar standing at 2.08 against the Turkish lira as of December 19 and Turkish producer Icdas’ upward rebar price revision following the decision by the US Fed to cut back on its monthly bondbuying program, buying activity increased in the Turkish domestic rebar market. Buyers accelerated their purchasing activity in the belief that prices would increase further. Meanwhile, local mill Kardemir received increased demand on December 19, and sold approximately 37,250 mt of rebar in total in its domestic sales, which were opened in December 27 at the price level of TRY 1,182/mt ($568/mt) ex-works, excluding VAT. As SteelOrbis heard from market sources, Turkish rebar export oﬀers increased by only Volume 7; Issue 1
$5/mt on the lower end from $585-$590/mt FOB on actual weight basis as of December 20. Given the increased strength of the US dollar against the Turkish lira, with the exchange rate at 2.09, local prices were revised upward and activity accelerated, providing support for a slight increase in export oﬀers. In addition, stronger raw material prices also provided support for mills’ rebar export prices. Meanwhile, an Iskenderun-based Turkish steelmaker sold approximately 35,00040,000 mt of rebar in the 51st week of 2013 at the price level of $595/mt ex-works to Iraq, where activity started to slow down over the week. In the meantime, due to the easing of international sanctions on Iran, the country increased its production and started to give rebar oﬀers at around $560/mt FOB on theoretical weight basis for the Middle East and North Africa, which were the target export markets of Turkey, resulting in fierce competition in the region. is situation impacts the improvements on the export side for Turkish mills. In the 51st week of the year, SteelOrbis learned from market sources that mesh quality wire rod export oﬀers from Turkey remained unchanged on weekly basis at $590-$595/mt FOB. Demand was still reported to remain sluggish in Turkish wire rod suppliers’ export markets and purchasing activity in these markets was slowing down further ahead of the approaching New Year and Christmas holidays. In the meantime, the unwillingness of scrap suppliers to reduce their prices provided some support for Turkish wire rod export oﬀers, despite the lack of demand support. Spot prices in the Turkish domestic rebar market were trending sideways as of January 8. Local mill Kardemir’s domestic rebar sales, which were opened on January 7, at the price level of TRY 1,255/mt ($576/mt) ex-works, excluding VAT, attracted no demand so far. Meanwhile, the fluctuating trend of the Turkish lira against the US dollar impacted local demand negatively. Most producers reduced their production levels, which will likely decrease the overall volume of mills’ sales. In the meantime, Turkish steelmakers were focusing on their local markets due to the lack of improvement on the export side.
els and order activity stable. e next “bite” would likely come in the last days of the year, although whether Nucor would go for a third $10/nt in a row or a more ambitious— and equally attainable—$20/nt remained to be seen. Until then, spot prices lifted into the range of $33.50-$34.50 cwt. ($670-$690/nt or $739-$760/mt) ex-mill. As for imports, Portugal raised CFR offers to traders by about $0.50 cwt. to $32.00 cwt. ($640/nt or $705/mt) DDP loaded truck in US Gulf ports, with new oﬀerings from Taiwan coming in around the same level. Even Greece and Egypt were in early talks with US-based traders, although Greece’s slow, methodical initial processes meant Greek rebar wouldn’t be on the US radar until well into 2014. Egyptian mills, on the other hand, were looking to oﬀer January production to the US, and while prices were not yet set, traders expected they would be on the upper level of the new import rebar source spectrum. e year came to a close without another US domestic rebar price increase, which led some to speculate about the market. Despite the boost from months of uptrending scrap prices, US domestic rebar mills touted strong demand as the primary driving force behind their continual, if moderate, increases in rebar transaction prices. However, some sources told SteelOrbis that certain large distributors were able to book orders under $33.00 cwt. ($660/nt or $728/mt) ex-mill in late December. End-use demand was decent and expected to strengthen as the winter months give way to construction-friendly spring, but sources pointed to imports still flowing into US ports as the main detractor from US domestic mill demand.
Turkish mills’ rebar oﬀers were varying in the range of TRY 1,255-1,305/mt ($576$599/mt) ex-works, excluding VAT.
Chinese long product activity slows in late December/early January During the week ending December 23, in the Chinese domestic market rebar and wire rod prices indicated downward trends, while overall transaction activity slowed down further. On December 23, rebar futures contract (1405) oﬀers closed at RMB 3,612/mt ($590/mt) on the Shanghai Futures Exchange, decreasing by $10/mt week on week. In the given week, traders lowered their sales prices of rebar and wire rod due to weakened downstream demand. Meanwhile, the mills were finding it hard to keep prices stable amid the diﬃcult market conditions. In particular, some mills chose to reduce their ex-mill prices of rebar and wire rod in order to attract more business, and this exerted downward pressure on prices in the spot market.
Activity slows in Spanish rebar market Markets sources stated that rebar prices in the local Spanish market were still standing at €485-490/mt ($664-$671/mt) delivered, indicating no changes over the week as of December 25. Meanwhile, Spanish rebar export oﬀers remained stable since previous week and were still at €465-470/mt ($637$644/mt) FOB. Market sources stated that some deals were concluded from Spain to Algeria at the level of €480-490/mt ($658$671/mt) CFR and sales for January production materials were completed as of the last week of the year, while activity slowed down amid the approaching of the holiday period. Weak construction activity impacts Saudi Arabian longs market In the last days of the year 2013, according to market sources, mesh quality wire rod oﬀers in the local Saudi Arabian market were varying at SAR 2,700-2,900/mt ($720$773/mt) delivered. Meanwhile, Turkish wire rod oﬀers to the country stood at $575$590/mt CFR, market players stated that following the deportation of illegal workers in Saudi Arabia, according to new legal reg-
ulations, construction activity in the county slowed down and so demand for import wire rod was weakened
US flats prices make slow upward journey in late 2013 US domestic cold rolled coil (CRC) prices climbed in early November after several mills announced markups on their products. CRC spot prices jumped by about $1.00 cwt. ($22/mt or $20/nt), settling in the general range of $38.00-$39.00 cwt. ($837-$859/mt or $768-$780/nt) ex-mill. In letters to their customers, both USSPOSCO and California Steel Industries (CSI) announced they were increasing their hot rolled coil (HRC) and CRC spot market base prices by $2.00 cwt.($44/mt or $40/nt). However, AK Steel announced an increase of only $1.50 cwt. ($33/mt or $30/nt), and SteelOrbis sources confirmed that that Severstal responded with a meager $1.00 cwt. price increase. Buyers said they expected more mills would hike their prices within the next couple of weeks, and predicted the market would likely absorb the smaller of the increases instead of the largest because supply levels were still high thanks to attractive import oﬀers. In essence, the price hikes leveled the playing field by forcing major buyers to start paying prices closer to what everyone else was paying. As for imports, Indian CRC oﬀers continued to climb as high demand had orders booked through springtime. Indian CRC increased by about $1.00 cwt., settling in the general range of $36.00-$37.00 cwt. ($794$815/mt or $720-$740/nt) DDP loaded truck in US Gulf ports. ough there was no movement in Chinese oﬀers, buyers anticipated an uptick sometime during the month as that market started to see more demand while contract negotiations played out in the US. Prices and buying activity stayed firm throughout the rest of the month, and sources said they anticipated the trend to continue through the end of year, though booking activity could start to slow as the holidays approached. Some buyers were also Volume 7; Issue 1
holding oﬀ on placing any new orders because they were trying to clear out existing inventories before the year ends so they wouldn’t have to pay taxes on them, which is required by law in some states. Soft import oﬀers on CRC and HRC continued to keep buyers shopping overseas. India continued to be the top pick for many buyers who wanted CRC, with orders being placed for April. Russia started to become more competitive in its HRC pricing, and sources said they suspected that it would draw a lot of interest in the coming weeks. As buyers looked to 2014, too much import inventory hitting US shores in the spring was still a concern because that could put stress on the domestic market. In November, CSI announced a price increase on flats and galvanized products: $1.50 cwt. on HRC and $2.00 cwt. on CRC for February orders pointed to a likely trend direction for the rest of the country, but sources were split on how much would trickle eastward. However, about a week after CSI’s announcement, US Steel rolled out an immediate price increase for flat rolled products spot orders by a minimum of $1.00 cwt. applying to all new orders. Despite the increase being immediate, HRC spot prices remained flat in the general range of $33.00-$34.00 cwt. ($720-$750/mt or $660-$680/nt) ex-mill and CRC spot prices are still approximately $38.00-$39.00 cwt. ($837-$859/mt or $768-$780/nt) exmill, although sources expected mills to get a little bit more aggressive with the increases early in the first quarter. Attractive import pricing and slow purchasing activity over the holidays lessened the demand for domestic orders. en, in late December, Nucor announced new asking prices of $35.00 cwt. ($700/nt or $772 mt) for hot rolled coil and $40.50 cwt. ($893/mt or $810/nt) for cold rolled coil orders, although spot prices were not immediately impacted. However, at the start of the New Year, HRC spot prices increased by $1.00 cwt. exmill and CRC spot prices increased $0.50 cwt. ex-mill. Sources said it was too early to tell if prices peaked, and many wondered if mills would start making deals again.
Turkish flats market activity remains sluggish On the first days of December 2013, demand in the Turkey’s export markets for flat steel products remained slack. In line with the global price hikes, quotations levels in the export markets recovered, while Turkish mills revised their prices upward by $5-$10/mt as well, though the new levels were considered to be on the high side. With the influence of the approach of the Christmas holiday, activity for flat steel products remained sluggish, especially in the European markets. Turkish mills’ hot rolled coil (HRC) export oﬀers were found at $585-$595/mt FOB,
while their cold rolled coil (CRC) oﬀers stood at $690-$700/mt FOB as of December 6. As the year drew to a close, demand in the local Turkish cold rolled coil (CRC) market was on the weak side, while prices remained stable over the 51st week of 2013—just like prices for other flat steel products in Turkey. Buyers continued to conclude deals only in line with their needs. Meanwhile, Turkish mills’ CRC prices were still standing at $700$715/mt ex-works.
Price increases in UK flats market fail to gain acceptance On December 20, an important report regarding the flat steel market in the UK indicated that flat steel demand in the UK remained soft due to the approach of the Christmas holiday, while a price hike of £30/mt ($49/mt) failed to gain acceptance in the market. Buyers in the UK market had diﬀerent opinions regarding whether this increase would be absorbed by the market or not. Considering the approach of the holidays, some buyers stated that the slowdown in activity was normal at that time of the year and that purchases would resume after the holidays at the new price levels. Meanwhile, others believed that there would not be any significant changes in demand in January, and so this hike would likely fail to gain acceptance in the market and buyers will continue to conclude deals at the previous prices. In addition, import hot rolled coil (HRC) oﬀers to the UK softened by £5/mt ($8/mt) over the 51st week of 2013, while the number of import oﬀers decreased. HRC prices in the local UK market could be found at £410-420/mt ($668$685/mt) ex-works for February production and excluding VAT. Meanwhile, HRC oﬀers from other regions of Europe to the UK stood at £405410/mt ($660-$668/mt) +VAT CIF for February-March shipments. In addition, Turkish origin HRC oﬀers to the UK were at £425/mt ($693/mt) CIF for March shipments, while Indian origin HRC oﬀers stood at £400-405/mt ($652-$660/mt) CIF for April deliveries and Russian HRC oﬀers to the UK were at £400/mt ($652/mt) CIF for Volume 7; Issue 1
April deliveries. e oﬀers in question do not include VAT.
Chinese flats activity slacks ahead of Lunar New Year holiday During the week ending December 31, Chinese domestic hot rolled coil (HRC) prices mostly moved on a stable trend, though with some very slight downticks were also seen. Even though a shortage of spot materials still existed, traders were negative about the prospects for a rise in domestic HRC prices given the low levels of liquidity. Accordingly, most traders maintained a waitand-see stance. Regarding the first week of January, with restocking activity expected to pick up and with possible improvements in the liquidity situation, it was thought that Chinese domestic HRC prices would probably move mainly on a sideways trend, with some slight upticks. During the week ending January 2, Chinese domestic hot dip galvanized (HDG) prices were mostly characterized by a sideways trend. Overall transaction activity in the Chinese domestic HDG market remained sluggish in the week in question, as some mills were still experiencing tightness of funds. Meanwhile, inventories at the mills remained at high levels and, with the approach of the Chinese New Year holiday (at the end of January), most traders showed little inclination to build up their stocks. It was expected that local Chinese HDG prices would remain stable in the coming days. During that same week, Chinese domestic hot rolled coil (HRC) prices mostly moved down slightly. e expected increase in purchasing activity before the holiday was not witnessed and transaction activity in the Chinese HRC spot market actually slackened. Meanwhile, most traders were cautious about the prospects for the market in the coming period and were more reluctant to lower their prices in order to stimulate business. On the other hand, during the next week, the Chinese domestic cold rolled coil (CRC) market mostly moved on a slight downtrend as actual transaction activity in the local Chinese CRC market was decreased steadily. SO\
Steady uptrend in Mexican flats market wavers at end of 2013 In late November, Mexican domestic hot rolled coil (HRC) prices saw a meager uptick of $3/mt to settle at $737/mt ex-mill. Although HRC prices had shown small variations in the prior four weeks, industry sources were optimistic about demand for 2014. In February, the start of operation for of Mazda and Honda, as well as auto parts companies and a Toyota transmission plant in 2015, will create around 9,000 new jobs in Guanajuato state. Meanwhile, prices for Mexican domestic cold rolled coil (CRC) increased $6/mt to reach $841/mt ex-mill. By December, Mexican HRC prices increased another $4/mt to settle at $741/mt ex-mill, while CRC prices increased a more robust $23/mt to reach $864/mt ex-mill. Despite the strength in prices, production in the automotive sector declined slightly in November. Mexican manufacturers produced 255,695 light vehicles during the month, 3.5 percent below the 265,001 units produced in November 2012. However, accumulated production for the January-November period reached record levels, at 2,769,244 units, an increase of 2.4 percent compared to January-November 2012. Due to the holiday season and resulting downtick in buying activity, many in the Mexican flats market were not surprised that HRC prices fell $2/mt in late December to settle at $739/mt ex-mill. Even the stronger CRC market saw a slight drop in spot prices, although only by $1/mt to reach $863/mt ex-mill.
How will Mexicansteel fare in 2014?
SteelOrbis Americas’ Mexican correspondent looks toward the Mexican steel industry in 2014—highlighting issues of concern and bright spots of hope.
exico’s steel industry could grow in the coming years on account of strong domestic economic growth—the forecast for steel-intensive growth in the automotive, construction and infrastructure sectors point upward as Mexico’s economy further industrializes. In a global steel market still facing overcapacity and low output prices, Mexican steel producers are poised to outperform others. However, as many expect steel prices to remain relatively subdued, production growth will lag behind consumption growth. Financial sources forecast Mexico’s annual steel production and consumption growth to average 4.9 percent and 5.3 percent, respectively, between 2014 and 2017. e Mexican steelmaking industry comprises both domestic and foreign producers, with firms Altos Hornos de México and ArcelorMittal leading. “Mexico’s exposure to the US, which we forecast will outperform other developed economies, as well as Central and Latin America, should drive growth in the country’s manufacturing base, particularly in the auto sector,” said one financial analyst. Government oﬃcials, meanwhile, recently revised GDP forecasts for 2013 and 2014 downward, even though they remain optimistic on the country’s medium-term prospects and see headline growth accelerating to 2015. Steel-intensive sectors, particularly construction and infrastructure, will benefit. e most recent data on steel production in Mexico from the World Steel Association (worldsteel) indicates that Mexico produced 1.5 million tons in November, up 0.2 percent against the same month in 2012, and between January and November 2013 totaled 16.5 million tons, 1.5 percent higher against the same period in 2012. Additionally, the National Chamber of Iron & Steel Industry (CANACERO) proj-
ects a consumption of 23.68 million tons for 2014, which would mean an increase of 1.2 percent over 2013, and production expected to grow 0.4 percent to reach 18.05 million tons, compared to 2012 production of 17.97 million tons. However, CANACERO forecasts the apparent domestic consumption of liquid steel for the end of 2013 to total 23.4 million tons, down 0.9 percent from the 23.6 million tons consumed in 2012.
Hope amid crisis In Mexico, the housing construction crisis of 2013 had a severe impact on demand for rebar and wire rod. According to analysts, major Mexican homebuilders Homex, Urbi and Geo lost a combined US$20.5 billion in shares on the Mexican Stock (BMV) in less than a year—a decline of 85.4 percent compared to the previous year. Meanwhile, a shift in the politics of housing construction in Mexico began with the previous administration and resumed with the government of Enrique Peña Nieto with a new National Housing Policy announced in February 2013. Under this new plan, the government will guide credits and subsidies to encourage the construction of housing near vertical urban workplaces and population development. Large corporate real estate, representing 17 percent of all housing to be built in Mexico, is facing one of the worst crises in history, according to real estate consultants, due to a liquidity problem that must result in optimizing resources, laying oﬀ staﬀ and deciding if departments are still profitable to survive. In late July, the BMV suspended Urbi for not submitting the results of its second quarter in a timely manner. At the same time, Geo was also suspended and suﬀered a 24.55 percent decline of its shares during trading that day. Homex shares also fell, by 31.33 Volume 7; Issue 1
percent. Collectively, Geo, Homex and Sare lost US$4.6 billion in market value during the second quarter of 2013, a total that hit debtholding banks such as Santander and Banorte Mexico especially hard. New administration, new policy 2013 was a year of political transition in Mexico, not only because of the change in presidential administration, but because the return to power of the Institutional Revolutionary Party (PRI), which after 70 years of power, lost the presidency between 20002012.
President Enrique Peña Nieto marked the return of the PRI to power
In early 2012, the government of Enrique Peña Nieto announced its National Housing Policy, stating that “the housing industry will require structural adjustments, so a transition period of 24 months will be established so that all stakeholders can make the necessary changes. With this new policy, it will begin a new era of achievement and great success for the sector and for all Mexico.”
A disaster’s silver lining Disasters caused by hurricanes Ingrid and Manuel in September, however, oﬀered a
glimmer of hope amid the destruction. e announcement of a rebuilding infrastructure program aroused the optimism of the construction industry and steel industry, but the year still closed with setbacks in actual steel consumption. A report from CANACERO indicated
Hurricane Manuel blasts western Mexico
that while the index of industrial construction activity has maintained an annual growth rate of nearly horizontal with just 0.5 percent since 2006, consumption of rebar in January-September 2013 shows a cumulative decline of 9.2 percent compared to the same period in 2012, with a negative trend behavior looking retrospectively from 2006 to 2013. From January to September 2013, the national apparent consumption of rebar fell 9.2 percent, accumulating 2.11 million tons against 2.38 million tons in the same period of 2012. e production of rebar fell 0.5 percent in the same period to reach 2.68 million tons against 2.67 million tons in the same period of 2012. Regarding the wire rod, the fall in domestic consumption for the January-September 2013 period was 3.3 percent, totaling 1.58 million tons against 1.63 million tons during the period same period of 2012. Production of wire rod, meanwhile, registered a decline of 3.1 percent, accumulating 1.84 million tons during the first nine months of 2013 Volume 7; Issue 1
versus the same period of 2012, in which it accumulated 1.89 million tons. Rebar prices were hard hit during the whole year, with the idle capacity in Mexico at 3 million metric tons. Adding to the mix was the joint antidumping (AD) and countervailing duty (CVD) investigation launched in September by US rebar producers against Turkish and Mexican rebar imports. “Producers had to sell their products in other markets as the domestic and US markets were virtually frozen,” said one industry source. Before the petition was filed, however, rebar exports from January to September jumped 59.2 percent to 598,663 tons (US$408.62 billion) compared to 376,001 tons (US$268.23 billion) in the same period of 2012.
Unfortunate figures Deacero, one of Mexico’s leading producers of wire rod, invested US$550 million in a new plant in Ramos Arizpe, in the northern state of Coahuila, but domestic demand was not suﬃcient to recover the company’s investment. Raúl Gutiérrez , CEO of Decacero, said the company is struggling because the market is not as good, but still working to consolidate and improve conditions. “2014 is expected to be a better year because we see better prospects. We do not believe that they will be spectacular, but far better than it was in the year 2013,” he said. He added that the recovery in the steel sector and in the production of Deacero’s 4M plant (rebar, wire rod, profiles, etc.) will depend on how the economy and the construction sector is reactivated. “Apparently the reforms that have been announced and government spending, public plus private investment, this is going to trigger growth, but do not know if it will be up 2 or 3.5 percent,” he said. Major long product service center operator Grupo Collado said its net sales fell by 9 percent in the third quarter of 2013 in comparison with the corresponding period of 2012, as a result of lower steel prices. Sales revenues reached 1.24 billion pesos (US$96.9 million), down from 1.37 billion pesos ($106.5 million) in 2012.
However, the construction industry fell sharply in 2013, seeing contractions in the first three quarters and showing the largest decline in the third quarter—a 6.9 percent decrease. e forecast for the end of the 2013 predicted a downward adjustment of 4.5 percent. e recession in the construction industry worsened in September and dragged down industrial production in Mexico. According to the National Institute of Statistics and Geography (INEGI), construction output fell 8.3 percent annually, accumulating 10 months of contraction and submitting its worst level since April 2009 and the second lowest since December 1995. Alejandro Cervantes, and analyst with Banorte-IXE, said that the sharp decline in industrial activity intensified in the construction sector. Isaac Velasco, a BX+ Bank economist, said that furthermore, the sector has a poor outlook for 2014 due to delays in the implementation of the National Infrastructure Plan—it should have started early in the fourth quarter of 2013. He also noted that the situation in the housing sector could limit the growth of the construction sector. In this regard, Luis Adrián Muñiz, deputy director of economic analysis of Vector Casa de Bolsa, warned that the negative behavior of construction has begun to aﬀect the demand for materials related to this industry, such as steel structures, rebar, wire rod, pipes and iron and steel poles, electrically conductive wires, and cement and cement-based products, to name a few. e building index fell 8.7 percent annually in September and marked its worst performance in nearly four years, while construction of civil engineering works sank 8.5 percent annually, the biggest decline in almost four years. Also, specialized construction jobs decreased 5.5 percent per year. In the third quarter of 2013, construction activity fell 6.9 percent annually, the most severe slump since the second quarter of 2009. Sergio Martin, the chief economist at HSBC Mexico, estimated that construction will continue its struggle to grow.
e President of the National Confederation of Steel Distributors (CONADIAC), Raymundo Diaz, said that the profitability of the sector has shown a downward behavior for both steel service centers and distributors. While the service center side of the supply chain still maintained a very low profitability at 2.5 percent of sales, gross profit as a percentage of total sales in the period January to July 2013 was 4.1 percent at an industry level—service centers handle 5 percent and distributors handle 3.8 percent. Diaz said he is worried about the decrease of 1.5 percent in the construction industry for the first half of 2013 compared to the same period of 2012. is has caused distributors and service centers to report a decline of 8.3 percent in sales of rebar, in the period January-August 2013 compared to the same period of 2012. “It is essential that the budget for the national infrastructure plan of 2013-2018 be set and implemented,” Diaz said. It might be only hope for the Mexican construction industry—and Mexican long products as well.
Automotive to the rescue e great engine for the Mexican steel industry is the automotive sector—an investment of US$11 billion is expected between 2013-2018, according to Alonso Ancira, president of CANACERO and chairman of Altos Hornos de México (AHMSA). AHMSA has almost completed a US$2.3 billion expansion designed partly to supply automakers in its project Fénix; Ternium SA and Nippon Steel & Sumitomo Metal Corp. are teaming up on a US$1.1 billion investment to finish rust-resistant steel, and South Korea’s Posco is spending US$300 million to more than double capacity for similar products. Additionally, the Mexican Automobile Industry Association predicts output will climb almost 40 percent to 4 million vehicles by 2017 as Nissan Motor Co., Honda Motor Co., Mazda Motor Corp. and Volkswagen AG’s Audi unit build factories that join longstanding plants for US carmakers General Motors Co. and Ford Motor Co. “Mexico is the world’s 13th-largest maker of steel overall, its production of automotivegrade metal that has been galvanized, or
coated in zinc to prevent rust, remains low,” said Oscar Albin, president of the National Autoparts Industry (INA). at has been largely imported from the US and other countries, Albin said. Between January and October 2013, Mexico produced 13 million tons of rolled steel, 28 percent of the total production in Latin America, only behind Brazil with 22 million tons. But Mexico remains the country with the largest trade imbalance of rolled steel in Latin America from January to September 2013, at minus 2 million tons. A report from CANACERO stated that Mexican industrial dynamics reflect the unbundling of value chains in the national economy, which is primarily described by production of basic inputs for exports and increased imports of basic and intermediate inputs. e case of the manufacture of transport equipment and, specifically, the automotive industry is a clear example of that. Data published by INEGI show that over the past eight years, the automotive sector has grown at an annual rate of 5.1 percent and in 2013 so far, according to the Mexican Association of the Automotive Industry, experienced record production levels. While domestic production of hot rolled sheet has shown a downward trend, an increasing input of said product from countries like Japan, Canada and Taiwan in this sector assures the possibility of having imported inputs from anywhere in the world, if such inputs compete in accordance with sound business practices. Raymundo Diaz, president of the National Confederation of Steel Distributors Volume 7; Issue 1
(CONADIAC) said the companies linked to the construction industry and the foreign market will slow growth in 2014, but growth in gross domestic product is expected 2 to 3 percent, maybe a little better than in 2013. He recalled that 2012 was diﬃcult for the sector, although focused on the business of auto parts and automotive sectors had a good year. Profit margins for steel distributors have experienced a downward trend, he said, and if circumstances change, this could go in the same direction. is is glimpsed with the slow recovery of the industrial sectors and there is oversupply in the market, in addition to the increased competition from the mills. Diaz said that the massive steel entrance to the country, as evidenced by Alacero’s figures, is harmful to the industry, but Mexico needs to import steel products that are not produced in all grades required. “ere are plants that produce certain products and have to be imported; there is a question on which we would be looking for that balance between supply and demand.” For now, the Mexican steel industry managed to get the Ministry of Economy to recognize the existence of increasingly unfair practices by various steelmakers, which distort the principles of fair competition and affect domestic producers, which, unlike other countries, have no preferential subsidies or support systems industry. e need to establish the system of prior import permits was established, whereby importers must require from the mill a certificate that determines the origin to the precise characteristics of steel products. SO \
he University of Phoenix Stadium, home to the Arizona Cardinals, can host up to 72,200 spectators—and if you lined up all their seats into one row, it would stretch more than 18 miles. at’s a staggering capacity, but what’s perhaps even more impressive is the stadium’s retractable roof, which was the first in North America to ride on inclined rails. e design is a magnificent feat made possible through a joint eﬀort between Schuﬀ Steel Company and engineers from Walter P. Moore. Back in 2000 when planning began, the team made a bold decision to construct a major portion of the 5,425-ton roof on the ground and then raise it into place using a single super-lift. e overall stadium design is the brainchild of renowned architect Peter Eisenman, and original plans called for a roof with a low-profile surface, and a depth that would not block any views for fans in the upper rows. In order to satisfy those requirements, the team used a pair of Brunel Trusses, which are named after British engineer Isambard Kingdom Brunel, whose 1859 design of the Royal Albert Bridge served as the archetype for the roof ’s structure. ese two Brunel trusses provide the primary support for the stadium roof, and they span about 700 feet along the east and west sidelines, resting on four concrete supercolumns. Entire sections of the trusses were fabricated and assembled at Schuﬀ’s workshop, which is not far from the stadium. Each steel connection point was carefully matched, thereby avoiding any need for modifications once the pieces were assembled on the field.
Glendale, Arizona, USA
e design also features retractable roof panels, which ride on a rail that’s centered on the top of the Brunel trusses. ese retractable panels are 180 feet long by 270 feet wide. When they are closed, they cover the center opening in the rooftop, allowing the stadium to be heated during cold months— and when they are open, they expose the entire field to the back of the end zones, while still providing shade for the spectators. Each panel weighs 550 tons, and because they are so large, it takes about 15 minutes to open them.
In 2005 the time finally came to move the roof structure into place, and it was a nailbiter. It was a cold winter day, with rain in the forecast. e move began at 7 a.m. with the truss tie-downs coming oﬀ first. e roof began its 120-foot ascent at midday as the 700-foot long Brunel trusses began to lift from their supports. By 3 p.m. the trusses cleared the final supports and the roof was finally in place. e remainder of the roof was built soon after, with detailing provided by BDS Steel Detailers. Today each truss sits about 87 feet high at its tallest point, and the top of the roof is 206 feet about grade. Because the stadium was designed to be a multi-purpose venue, another key design element is its moveable field, which is the first of its kind in North America. e football field can be moved by traveling along 13 steel
rail lines that lead south, ultimately taking the field outside of the stadium. Once it’s outside the stadium walls, it can be used for other sports, like soccer. is rail system was also fabricated and erected by Schuﬀ, and was put through several tests to ensure it would withstand the wear and tear of sporting events. e structural grid is built on twin W18 composite steel beams, which span between wheel boxes that are spaced along the rail line. at steel frame is buried underneath a 5-inch composite slab, a drainage mat, and 12 inches of soil and playing turf. Using this system, the football field can be moved 740 feet in 65 minutes. e exterior of the stadium also pays homage to the surrounding Arizona desert, with an exterior skin that’s supposed to resemble a barrel cactus—and shimmering metal panels intended to reflect the sky’s light and colors. After years of planning and building, the $455 million stadium opened on time in August of 2006, the same year the Cardinals brought home a Super Bowl title after defeating the Pittsburg Steelers. In 2008, the University of Phoenix Stadium went on to earn a spot in NFL history when the New York Giants took down the undefeated New England Patriots, making for one of the biggest upsets in Super Bowl history. at game proved to be one of the most-watched football games in the nation, with a record setting 148.3 million total viewers. Indeed, the stadium’s design has provided the backdrop for some of the biggest moments in American sports history, and its structural integrity ensures it will continue to provide a venue for diehard fans for generations to come. SO\
Mr. Bull: I trust you are doing well, Mr. Gloom, even though you must be in agony about another dismal year being upon us. I for one am grateful that we all came out of 2013 relatively unscathed. No, it was not a good year; but at the same time it was not all that bad either. e Europeans managed once again to keep the lid down on their explosive container of financial problems and a major calamity was avoided. e formerly high-flying BRIC countries have had their wings clipped a bit and now all the attention, all the hope for 2014 has shifted again to the mature economies of the United States, Japan, and a couple of EU countries who are not on the verge of collapse. Prospects for this year are not too shabby with the United States finally being on the verge of a break-
Mr. Bull: All the hope for 2014 has shifted again to the mature economies of the United States, Japan, and a couple of EU countries who are not on the verge of collapse.
through year; economic growth could exceed 3 percent, inflation is low, and the country seems to be getting closer to energy-independence. Conditions could hardly be better. New steel mill construction is going through the roof and a number of states such as Oklahoma, North Dakota and Texas are in the midst of an old-fashioned energy boom. e car industry has been on fire for two years in a row now and housing starts are coming back. We may actually see more than 1 million homes being built this year. Before long, even the unemployment rate will drop to pre-crisis lows. e only cloud on the horizon may be that the US dollar will get too strong. Life is good! Mr. Gloom: I think your glasses are colored by Four Roses. However, you concede the year was “not all that bad” and European situation is “explosive”—that shows you finally may be ready for Lasik eye surgery. In fair-
ness, I confess my timetable for the explosion was too rapid. at was done out of wishful thinking, because the longer we delay really addressing the issue, the worse the inevitable collapse will be. Can you now see that we won’t grow out of our problem? We need real structural change and not just a change of administration. ere is a new, larger and permanent underclass. ey haven’t worked for years, they no longer receive unemployment and they are big enough as a group that their lack of buying won’t allow producers of goods to expand to help the economy. e real unemployment rate—if we count it as we used to—would be well over 15 percent, maybe even over 20 percent. According to a report conducted by the Congressional Research Service, since 1946, when data was first collected, the share of unemployed receiving state or federal aid has never dropped below 30 percent. Around 11 percent of job-seekers in South Dakota collect jobless benefits, 16 percent in Tennessee and Georgia, 17 percent in Michigan and 18 percent in Arizona, Florida, Indiana, Ohio, South Carolina, and Virginia. is means that 89 percent of job seekers in South Dakota, 84 percent in Tennessee, 83 percent in Georgia, 83 percent in Michigan, and 82 percent in Arizona, Florida, Indiana, Ohio, South Carolina and Virginia are NOT receiving benefits and thus are NOT COUNTED on those (unemployment) reports. If not for the energy boom and its multiple hundreds of thousands of jobs, we might have already had impeachment hearings. Meanwhile, the rich indeed are getting richer. e Wall Street guys are raking in billions because they are the conduit for all the printed money and QE! ey think their contributions to Obama keep them safe, but they are being set up. eir integrity needs to be questioned. ey are next and some of them know it. But they figure when they finally are targeted they will have gotten theirs so they, and their kids, are safe. e business donors are merely trying to survive but they too are compromised. e problem is that the new regulations and controls that target Volume 7; Issue 1
them will indeed 1) be an even bigger federal power grab than Obamacare and 2) put some big handcuﬀs on the US’s economy. ey need to read Atlas Shrugged.
Mr. Gloom: The real unemployment rate—if we count it as we used to—would be well over 15 percent, maybe even over 20 percent.
Our hope lies in the current high-tech industrial revolution that is going on. THAT is our future. If only the Democrats will allow it to happen. I might even let them take the credit for it, in spite of their squashing it at every turn in order to justify more control and patronism…as they surely will.
Mr. Bull: Sometimes I wonder what world you are living in. It is certainly a world where one must find negative economic data that can be held against any president that does not subscribe to your obscure, ultraorthodox, long-disproven economic principles. e jobless are not overwhelming the country. e unemployment number is going down. Here is the reality: consumption growth in Q4 of 2013 was around 4 percent. Housing starts late last year went through the 1 million annual mark for the first time since February 2008. e consumer confidence index is moving up and the PMI (Purchasing Managers’ Index) has been solidly above 50 for over a year now. Come on, wake up and smell the roses. Why are houses being built and cars being sold in record numbers? Because the middle class has gained confidence again and is spending money. Capacity utilization rates in the manufacturing sector have steadily risen and have reached their long-run average. Growth in durable good orders and shipments late last year also point to a rebounding economy. e headwinds are fading and the tailwinds are picking up. e US will be doing fine in 2014. ey will pull their NAFTA partners along and, indeed, a huge chunk of the global economy. I know that you still see
Mr. Gloom: My friend, can’t you read? e reason “the unemployment number is going down” is that the vast, vast majority AREN’T COUNTED ANYMORE! Do you not understand? e only reason that “the jobless are not overwhelming the country” is because of the record levels of other government assistance like food stamps (one in four homes receive them now) and, you guessed it, Obamacare. Who needs to work when we have food, medicine and can live with mom and dad or brother Joe? Speaking of that, houses are only being built in those states to where people are moving to avoid taxes (i.e. Texas) and because about 2 million
Mr. Gloom: Who needs to work when we have food, medicine and can live with mom and dad or brother Joe?
homes have been taken out of circulation during the crisis and aren’t yet back in because the banks foreclosed and own them and they are too run down to sell at the moment. Look up the figures for Ohio, Michigan and other rust belt states. And please don’t tell me that you trust the government’s figures on GDP when they are “adjusted” down retroactively every single quarter. If we can even believe those numbers. Oh, and regarding inflation: long-term interest rates are moving up in spite of the Fed and the all-but-nonexistent tapering. e “power to the (bank) people” party is still on but the smart long-term money is what to watch. e rest are reading the stock market like it’s the country’s EKG—it isn’t. It’s merely the lipstick on this pig.
Mr. Bull: Man, I did not realize how serious your case was. I follow numbers by the government which are based on facts and realities. Of course, being the eternal pessimist you follow numbers that are bandied about by conspiracy theorists and habitual naysay-
inflation bounding out of control and soup kitchens overrun by the down and out workers; but one of these days you will have to stop living in some sort of 1930s time capsule.
Mr. Bull: I am convinced the US will be the most powerful engine driving global growth and global trade. ers. Tough choice here. To finish with the unemployment rate issue, which seems to be your current flavor of the month: late last year the US economy added 203,000 jobs. At the time, even the more conservative media outlets hailed that jobs reports as an “unambiguous” success. ere you are. I don’t want to focus too much on the US either, even though I am convinced they will be the most powerful engine driving global growth and global trade. Germany and the UK, both in their own unique approaches, face a strong economic year. China is settling for a somewhat less spectacular growth rate of around 7 percent, but it is still a solid growth benefiting the global economy. Indications from the export component of the global manufacturing PMI point to a steep increase in global trade. All these changes are long overdue and have been much anticipated since the recession ended in 2009. It has been long in coming, but come it will. Of course, we can still operate under the assumption that the apocalypse is nigh. Fortunately, most of us don’t—there are not only government-issued numbers but a plethora of data issued by private and supranational institutions. Read this very carefully and share with your friends while you are sipping your tea wearing your blindfolds. is year, global growth of 4 percent plus is possible and will be pushed along by the resurgent American behemoth. America has a good chance to grow in excess of 3 percent. In the US, household and corporate balance sheets are in fairly good shape. American consumers have brought down their debt and are past the hangover of the 2008/2009 financial calamity. American business is competitive again because of cheap energy prices, wage restraints and a cheap dollar. Consumers will spend, businesses will produce and invest and even you know what that means. Cheers SO \ to 2014! Volume 7; Issue 1
Q&A with Frank Bergren
Metal Partners Rebar
Frank Bergren, Managing Director of Metal Partners Rebarâ€”one of the largest independent rebar distributors in the USâ€”offers his outlook for the 2014 market with SteelOrbis San Diego.
From a distributor standpoint, what are the strongest end-users for rebar right now? What are the weakest? FB: Our strongest sector has been agriculturerelated and our weakest has been government-related work—road work is down due to limited funding being released, and I don’t foresee any significant changes this year compared to last year.
With similar end-use applications, why do you suppose rebar demand is so strong whereas low-carbon wire rod demand is relatively weak? FB: My opinion is that wire rod has always been tied to more consumer-related consumption which is starting to do better, how-
Do you think that was a wise move? How has that affected your buying decisions? FB: Yes—I thought it was wise to remove the surcharge since the mills would adjust pricing based on market conditions versus scrap fluctuations. Scrap is still a great indicator of pricing pattern evolution, however; we operate in a market where there are no oﬃcial published prices on rebar, therefore, the value of the scrap surcharge became irrelevant.
ever, there are still a lot of wire rod imports entering the US market which make it challenging for the mills.
Do you foresee US domestic rebar mills increasing capacity utilization anytime soon? Why or why not? FB: I do see some of US domestic rebar mills taking eﬀorts to increase their capacity utilization. My concern is that if it will be enough to supplement the imports that will be removed from the supply chain and in which regions that the increase capacity utilization will be able to get to. One particular region that we should start to see some production increases will be on the West Coast, however, I am concerned that it will be enough as the West Coast market was one of the worst markets hit by the recession. In result of this, this is typically a symptom of one of the strongest recoveries. Do you think a West Coast revival will just involve existing mills increasing output? Or is this an opportunity for other steel producers to set up shop in the west? FB: I believe it will involve just existing mills increasing output—I don’t see anyone else looking to set up shop in the West Coast.
Around mid-2013, US mills tried out a new strategy of “divorcing” their pricing from scrap, thus the end of the monthly RMS letter with corresponding base price policy. Volume 7; Issue 1
Do you expect the US DOC and ITC to rule in favor of US mills in the upcoming trade case against Turkey and Mexico? If so, how will that affect the availability and price of US domestic rebar? FB: Yes—I do expect them to with Turkey, but I have always found Mexico to operate like a domestic mill would. Turkey’s pricing has set a floor for the US market which has always been a barrier as to how far the US mills can raise their prices without inviting more tons to the market. Mexico’s pricing has typically moved in sync with the patterns of US mill announcements or in many cases, ahead of them. e one key thing to recognize though is that some of the US mills will downstream operations, driving domestic prices down lower than import prices were actually at so that is the only argument that I can really see working against them. Other countries will start to enter the supply chain though because as domestic prices escalate, we become more attractive to the global market. Furthermore, the US economy is still one of the strongest in the world.
Do you think the disputed sources will find some way to get back into the market? Or are they likely to abandon the US as a major rebar destination? FB: I believe that they will and the surge of bookings that were set for January arrival is validation of the dependency. I am sure they are trying to find additional channels to move their tons, but it is hard to just lose the US as a customer when we are consuming 1 million plus tons of import rebar per year. How does your perspective of the trade case, as an independent distributor, differ from that of a mill-affiliated distributor?
Rebar in the US seems to be having a “moment” right now—what are your thoughts on current demand? Do you have a forecast for demand in Q1 2014? FB: Current demand is trending upward as we enter 2014. Reduced consumption has been expected for the seasonal slowdown which we are seeing in our sales volume; however, the perception of increased prices is going to keep customers bullish throughout at least the first quarter of 2014. Domestic mills have been working toward changing the way their customers buy steel and forcing a forward-looking approach. To achieve this, mills are not rolling outside of booked orders—they are controlling orders in an eﬀort to make sure tons are sold fairly based on historical trend. If you don’t book on a rolling, the chance of seeing floor stock available is slim to none. When you have been used to habitually buying from floor stock and you can’t anymore, it will force those to start planning ahead. Also, there is the unknown of reduced capacity with the AD suit and with increased demand, the question lingers as to whether domestic mills are going to increase their production enough to support it. Simple economics are already taking place in our pricing which is why we are seeing small incremental price adjustments. I do believe the domestic mills are attempting to take the market up in a responsible fashion; however, I am concerned about their ability to increase production to balance with demand.
FB: A mill-aﬃliated distributor is locked in and doesn’t have the options; it makes it more challenging as an independent as it removes options that may have pre-existed. However, there are always new options evolving and someone looking to fill the void. What other import sources are you looking at (Portugal, Japan, Korea, etc.)? Do you think these sources will have longevity in the market? FB: I do believe Portugal can hold some longevity in supplying the US market in
some regions of the country. I think Korea can be a viable source to the West Coast market; however, the additional travel to go through the canal makes cost questionable in my opinion. Same thoughts for Japan, however, Japanese steel has made it as far as the Midwest at cost competitive numbers. I have heard discussions with Taiwan coming back to the US market, but nothing firm at this point that has been attractive to take a long position. ere have also been speculations of Egypt coming back, but nothing firm at this point as well.
If there was one thing mills could do differently that would improve your distribution process, what would it be? What about with traders? FB: Domestic mills: be sure to balance out supply with expected demand and to keep the price increases at moderate levels so the market can appropriately digest them versus shocking the system. Traders: let the market reset, as once Turkish bar is absorbed from the surge, we should be able to absorb new price points SO that I would expect to be higher. \
Wire rod’s tale of woe By Katie Memmel Reprinted with permission from Wire Journal International Imagine a high school house party filled with anthropomorphic steel long products. Rebar is holding court on the makeshift dance floor, fending oﬀ suitors; merchant bar is flitting around with bowls of chips and drink refills, eager to please; wide flange beams are in the basement playing Magic the Gathering; and wire rod is shunted oﬀ to the corner, drinking too much and telling loud, oﬀensive jokes—desperate for attention. “Hey,” says wire rod, “I’m used in construction too—plus a bunch of other stuﬀ. So what makes rebar so special?” Poor wire rod. After suﬀering along with all the other longs during the height of the Great Recession, the Stumbling Recovery has not been kind to the versatile, market-spanning low carbon product. More than just concrete reinforcement, wire rod is a key component in appliances, heavy machinery, fencing, and even shopping carts. With the rise of consumer confidence and US industrial output, one would assume wire rod would be enjoying a golden period in its long history. But no. It stands in the shadow of its narrow-use cousin— rebar—enjoying none of the robust demand that has rebar “flying oﬀ the shelves” according to several distributors. e reasons behind this discrepancy in demand are varied, but there is also the element of supply to contend with. Although major US long product mills are currently running at about 65 percent for wire rod and rebar, wire rod supply is not nearly as tight. In the last few months, some mills have strategically shifted production schedules for rebar to support their pricing policies, and as such, when mills announced price increase upon price increase for rebar this fall, each uptick was easily absorbed into the market. Meanwhile, mills (often producing both product lines) that announced back-to-back price increases for wire rod in November and December were met with hoots, hollers, and juicy blown raspberries. Another factor in rebar’s pricing position is the recent trade case filed against imports from Turkey and Mexico—without the threat of yet another Q1 flood of ridiculously-priced imports, mills are free to set virtually any rebar price they want (although they have been remarkably restrained so far). Wire rod, meanwhile, has made several trips through the rumor mill—a petition against Chinese wire rod always seems just around the corner—with no significant outcome. If mills actually took action against China (which has accounted for only about 43,000 metric tons of wire rod in the US this year, compared to 59,000 metric tons last year and a decade high of 1.2 million metric tons in 2006), perhaps they would be able to corner the market the way rebar mills have. But it might not be that simple. According to one wire mesh producer, China supplies more than just wire rod to the US—the nation exports many drawn-wire products as well (about 117,000 metric tons have arrived into the US this year alone). is only compounds competition in the US—a problem that can only be solved by stronger demand. And despite wire rod’s versatility, construction appears to be wire rod’s only hope at achieving that goal. Fortunately, all signs are pointing up. Industry data show that construction spending is up in the US, foreclosures are down, and in a near-Christmas miracle, the US House of Representatives crafted a bipartisan budget deal that includes a “reserve account” for infrastructure—which basically leaves the option of further infrastructure spending on the table. Of course, it takes time for data to translate into actual orders, but an optimistic outlook might be enough to spur the wire rod market out of its current funk. A bullish attitude, combined with (perhaps) a slightly tighter availability and (maybe) a whiﬀ of petition filing against Chinese wire rod mills (it wouldn’t be the first time US mills started antidumping rumors for their own advantage)…in no time, wire rod could be right there next to rebar, flying oﬀ the shelves and absorbing price increases, dancing with popular kids and getting tagged in their selfies.
Volume 7; Issue 1
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AssofermetDay&SteelOrbisConference launches with a bang in Brescia
The first annual Assofermet Day & SteelOrbis Conference was held with great success on November 15, 2013 at Villa Fenaroli Palace Hotel in Rezzato in Brescia in northern Italy. The conference, organized by Assofermet (Italian association of traders of iron, steel, nonferrous metals, ferrous scrap, hardware and similar goods) and SteelOrbis, was attended by prominent local and international operators in steel-related sectors. In the morning, there were closed meetings for the various Assofermet product segments, as well as two open debates: the Assofermet Scrap division discussed the shortage of scrap in the Italian steel industry, under the coordination of Assofermet president Romano Pezzotti and with the participation of Cesare Pasini (Feralpi Siderurgica Spa), while the Assofermet NonFerrous Scrap division held a debate attended by Mario Bertoli, president of Assomet (Italian national association of non-ferrous metal industries), and Nicola Cantele of Eredi Gnutti Metalli Spa, among others. In the afternoon, Luca Veronesi, general manager of SteelOrbis Italy, and Roberto Lunardi, president of Assofermet, gave introductory speeches on the theme of the economic sustainability of the European steel industry. Joachim Schroeder, CEO of Research and Consulting Group, Serdar Kilimci, sales manager of Turkish steelmaker Çolakoğlu, Patrick C.P. Tuen, president of Shanghai Steel Trading International Chamber of Commerce, and Burçak Odabaşı, director of SteelOrbis, all made presentations. After the afternoon coffee break, there was a roundtable discussion with the participation of Antonio Gozzi, president of Italian steelmakers association Federacciai, Tommaso Sandrini, vice president of Assofermet, and Ugo Miretti of the European Commission. The debate was coordinated by Giulio Sapelli, economist and professor of economic history at the State University of Milan.
New approaches needed in Italian steel sector According to Romano Pezzotti, president of Assofermet Scrap division, and Cesare Pasini, vice president of Feralpi Group, a new approach is needed in the relationship between scrap dealers and steel mills. e debate they participated in during the event’s morning session, chaired by Pezzotti, focused on the lack of scrap availability in the Italian steel industry. According to Pezzotti, among the most critical problems in the current system is the lack of loyalty shown by scrap dealers to their customers, with scrap dealers becoming “loose cannons” that sell to one steel mill one day and the next day decide to sell to another mill. is generates price volatility which is diﬃcult to manage even
for big companies, he said. “is requires consideration of how we should face the fu-
Volume 7; Issue 1
ture,” added Pezzotti, who said he believes that the Italian steel industry is trying to deal with the current tough times by using old solutions. He went on to express hopes for greater synergy between scrap dealers and their customers (i.e., steel producers), who were represented in the debate by Cesare Pasini. e Assofermet oﬃcial remarked, “With Pasini, I always talk about these problems and there is a common intention to try to evaluate new projects and initiatives, but this is not enough. e entire supply chain must change its way of doing things.” For his part, Pasini said that last year the share of Italian scrap requirements obtained from abroad was equivalent to 30 percent of total domestic consumption, not much different compared to the figures of previous years. However, he added that in recent years new variables have emerged. For instance, the presence of Turkey has become increasingly significant. “We are at the mercy of what is decided in Turkey as regards knowing what prices we are going to pay in the near future,” Pasini said. In this situation, he continued, any glimmer of recovery in production will run the risk of being undermined by the diﬃculty in tracking the necessary volumes of scrap. “e volumes that Turkey withdraws represent about 12 percent of scrap consumption in the EU. In 2012, 11.5 million metric
dealers. Reviewing our strategies from week to week, if not almost daily, has become a diﬃcult task, which is why I say that we need a total change of strategy.” e Assofermet Scrap division president reiterated the need for scrap dealers to retain their customers with regular and constant volumes, preparing to act as a strategic stock source for them. e main focus, however, he said, is to overcome the great fragmentation which exists in the market and to encourage the creation of associations and aggregations along the supply chain. Without this prerequisite, according to Pezzotti, scrap dealers and steel producers will continue to oppose each other in a game which sometimes hurts one side and at other times hurts the other side.
European steel output and exports significantly down in recent years During the afternoon session of the event, Joachim Schroeder, CEO of Research & Consulting Group (RCG), said that most global producing regions have been facing decrease of steel output in the last years. In Europe, in particular, the decline was 4.6 percent in 2011 and estimated in 3.2 percent for 2013. According to estimates, European steel output should reach 164 million mt in 2013, compared to 169 million mt of 2012. Schroeder went on saying that in EU-27 in recent years long product production was characterized by greater volatility compared to flat steels—the share of
Volume 7; Issue 1
tons of scrap was exported from the EU to Turkey, while in the first nine months of 2013 the volume was 8.9 million metric tons. In Germany (where Feralpi subsidiaries are based, including ESF Elbe-Stahlwerke Feralpi GmbH and EDF Elbe-Drahtwerke Feralpi GmbH), the situation is a little diﬀerent thanks to a geographical area with large scrap resources and an export market which is less vulnerable. Moreover, it helps us to have monthly contracts that contribute to a much more stable price for scrap,” Pasini stated. He added that problems in scrap supply have been felt particularly in the past month. “Today, the diﬀerence between the costs of scrap for our Italian establishment and the costs for our German facilities is €30/mt,” he said. To solve the problems in the Italian steel sector, Pasini continued, “We need to stick together and find new sources of supply, and to buy as a team in order to bring a great volume of scrap into the Italian market… there are structural problems that are diﬃcult to overcome—primarily a huge infrastructure deficit compared to competitors, but unity gives strength.” “A review of our strategy is the first change of approach we need to implement,” said Pezzotti, who, just like Pasini, said he also favors monthly contracts that would increase stability in the market. He went on to say, “ere is a worrying lack of scheduling, especially for producers, but also for scrap
rebar, wire rod and other long products dropped below 40 percent between 2008 and 2012. Meanwhile, Schroeder said, capacity utilization rate has remained relatively low and further capacity expansions are expected in China, India and MENA region at least until 2015. According to data reported by Schroeder, in 2012 global excess capacity was 545 million mt and it will be even higher in 2013—it will take years to work oﬀ surplus without idling capacities. At the same time prices have decreased dramatically in all core representative regions. In 2012 all steel related industries suffered significant financial losses and mining companies were hit the most. In recent years tight competitive environment in the steel industry in general and in steel distribution in particular was fueled by the high fragmentation of the steel industry (especially in the distribution sector) and led to a further erosion of profit margins. Schroeder also focused on demand, saying that demand in mature markets is stagnating amid slowdown of the growth observed in 2013 in the former growth area like India and
AssofermetDay MENA. Mature markets development is rather moderate—after a strong growth in 2012 (8 percent), steel consumption in the US is expected to slow down (3 percent) for 2014, while Japan will stay negative in 20132014. European steel demand is facing further decline for 2013 with a moderate recovery (approximately 3 percent) foreseen for 2014. e cluster of BRIC countries has split into moderately growing Russia and Brazil, declining China and ascending India. Furthermore, between 2008 and 2012, European steel exports declined significantly, from 141.5 million metric tons to 127.2 million mt. Most of the flows reached the Middle East and North Africa countries. Schroeder added that construction is the largest steel consumer worldwide and that its share should increase further in the coming years amid intensive developments of emerging countries. In conclusion, crude steel production will decrease again in 2013 in most regions, but short-term forecasts are showing the first signs of recovery. Capacity utilization rate remains relatively low and more capacities are still to be commissioned, which is why global excess capacity will require idling capacities. Much will depend on macroeconomic developments: in particularly, weak confidence levels and continued economic uncertainty will continue to weigh heavily. Turkey’s flat steel exports to gain importance Serdar Kilimci, sales Manager of Turkish steel producer Çolakoğlu Metalurji, gave a
presentation on Turkish flat steel imports, exports, production and consumption, pointing out the imbalance between the production of flat products and long products in Turkey. In the first nine months of the current year, for instance, the output of longs amounted to 19.668 million mt, while flat steel output reached 7.137 million mt.
2013 totaled 8.383 million mt, against long steel imports of 1,078,000 mt. Kilimci stated that in the January-September period Turkey produced 7.1 million mt of flat steel and consumed 10.7 million mt of flats, with a production shortfall of 3.6 million mt. He then listed Turkey’s most important producers of slabs and hot rolled coils (HRC) in order of largest annual output capacities, starting with Erdemir (3.8 million mt of slab and 4.5 million mt of HRC), Isdemir (5.0 million mt and 3.5 million mt), Çolakoğlu Metalurji (3.5 million mt and 3.0 million mt) and Toscelik (1.5 million mt and 1.0 million mt). Kilimci also remarked that Çolakoğlu, Isdemir and Toscelik have a very flexible production flow, which can be shifted easily between billet and slab production. Concluding his presentation, the Çolakoğlu oﬃcial said that in the coming years the Turkish steel industry will focus increasingly on value-added products. He stated that the rapid increase in slab produc-
Flat steel will also become an important export product for Turkey in its export main markets. Serdar Kilimci, Çolakoğlu Domestic consumption in the period was 12.363 million mt for longs and 10.710 million mt for flats. Kilimci underlined that in the first nine months of 2013 production of finished steel products in Turkey rose by 4.8 percent, while finished steel consumption increased by 8.4 percent, year-on-year. In the given period, Turkey’s long product production exceeded domestic longs consumption by around 59 percent, while its flat steel production was equivalent to just 67 percent of flat steel demand in the country. A lack of balance is also observed as regards imports and exports. In the first nine months of 2013, Turkey’s exports of billets and blooms amounted to 1.356 million mt, compared to imports of 2.294 million mt. At the same time, Turkish flat steel exports in the period in question came to 1.858 million mt, compared to imports of 5.431 million mt. Finally, the country’s long steel exports in the January-September period of Volume 7; Issue 1
tion is expected to continue until 2015, while Turkey’s steel consumption per capita is expected to continue to move towards the level of developed countries. Furthermore, in parallel with the investments in flat steel production in Turkey, the share of Turkish producers in the domestic market for hot rolled flat products will increase, while Turkish flat producers will also be more active in the international markets. Kilimci said he thus believes that, in addition to long products, flat steel will also become an important export product for Turkey in its export main markets and that the ability of Turkish producers to switch between long and flat steel production will give them a competitive advantage.
Turkey to remain world’s top scrap importer During the afternoon session of the conference, Burçak Odabaşı, director of SteelOrbis, provided a snapshot of the current state of the Turkish steel industry, with special
umes, both in 2012 (receiving 41 percent of the total) and in the first nine months of 2013 (with 54 percent), mainly due to the diﬃculties faced by Italian Taranto-based flat steel producer Ilva, as previously reported by SteelOrbis.
Fears expressed for EU steel sector’s future A roundtable discussion was held on the economic sustainability of the European steel industry at the conclusion of the event. Participants in the discussion, which was chaired by economist and university professor Giulio Sapelli, included Antonio Gozzi, president of Federacciai, Tommaso Sandrini, vice president of Assofermet, Georges Kirps, managing director of Eurometal, and Ugo Miretti of the European Commission. According to Antonio Gozzi, European manufacturing, and with it the regional steel industry, is in danger of disappearing because of the European Union and its mediocre political class. e diﬃculties in the steel sector, linked to overproduction, fragmentation, costs and fierce competition in the supply of raw materials (i.e., scrap), concern not only Italy but all of Europe. Nevertheless, according to Gozzi, in recent years Europe has not been able to provide adequate measures of social support. “In the European steel industry, more than 40,000 jobs have been lost in the last 24 months and approximately the same number of jobs will be lost in the next 24-36 months,” he stated. Gozzi went on to say that, if things do not change, the euro-skeptics will win and then will make them change. Given the current situation, Gozzi continued, steel production will disappear from Europe and shift to the US, which, thanks to shale gas, will be able to achieve electricity costs which will be 25-33 percent lower compared to costs in Europe. He also stressed that the US can count on a flexible workforce and does not have to deal with environmental pressures, unlike European producers. Ugo Miretti, in defense of the European Union, said that, following the creation of a European market, further steps are now being taken and that Europe is meeting the growing needs of the continental indusVolume 7; Issue 1
try. Nevertheless, participants in the debate were unanimous in saying that time is in short supply and that action must be taken as soon as possible or large sectors of European industry will die. According to Tommaso Sandrini, Europe does not need any more incentives or monetary contributions, but “a few clear rules”. Secondly, he said, it is necessary that “we take protective measures also in regard to our consumption,” accompanying such measures SO with new strategic directions. \
focus on Turkish trade with EU countries. Turkey ranks ninth among the biggest steel producing countries in the world, with 25.819 million mt produced in January-September of 2013. About 74 percent of Turkish crude steel production is via electric arc furnaces, with 26 percent produced by blast furnaces. In 2012, Turkey was the world’s biggest importer of steel scrap. e total global international scrap trade volume was 106.6 million metric tons in 2012, while total global scrap consumption amounted to 570 million metric tons. In 2012, most scrap imported by Turkey originated in Europe (50 percent) and the US (32 percent), followed by the Black Sea region (9 percent) and the Mediterranean region (9 percent). Odabaşı forecast that Turkey will continue to be the world’s biggest importer of scrap, ready to seek scrap from all regions of the world. At the same time, she said it is very diﬃcult to forecast China’s situation based on current available data, though it is estimated that China will be a net scrap exporter by 2020. Black sea region scrap exports are likely to decrease further and so European and US supplies are likely to increase in importance. Odabaşı then focused on Turkish rebar exports, which in the first nine months of 2013 were supplied to Iraq (18 percent of the total), the UAE (15 percent), the US (7 percent) and other countries (39 percent). In the same period, Turkey’s rebar exports to EU countries amounted to over 140,000 mt. As regards wire rod, Turkish exports in the January-September period of 2013 went to Libya (13 percent of the total), Israel (13 percent), Iraq (6 percent), Singapore (6 percent), the US (6 percent), Italy (5 percent) and other countries (51 percent). Moving on to Turkish imports, Odabaşı pointed out that in 2012 Turkey purchased 53 percent of its hot rolled coil (HRC) imports from EU countries and 47 percent from the rest of the world. In the first nine months of 2013, the EU supplied 48 percent of Turkey’s total HRC imports. Meanwhile, HRC exports from Turkey to the EU in 2012 amounted to over 211,000 mt, while the volume surged to more than 243,000 mt in the first nine months of 2013. Italy accounted for a major share of these export vol-
“Ghostly face” seen in steel collected from the World Trade Center Well this is certainly enough to make your skin crawl: a steel column that was collected from the North Tower of the World Trade Center has gained national attention after photographs showed an eerie face appearing on the structure. e beam itself is part of a museum exhibit called Impact Steel, and countless ghost-hunters have made the pilgrimage to see it for themselves. Not everyone is able to make the face out, according to museum oﬃcials, who believe lighting and position of the viewer play a large role. ose who have seen the face say it’s turned slightly to the side and looks to be screaming. Scientists at Carnegie Mellon University say the odd image was not imprinted on the steel due to the plane crash, but is instead a result of atmospheric corrosion. When steel is merged together in layers, moisture can cause all sorts of patterns to corrode into the metal. Others have said the image is merely a trick of the mind and that
humans all over the globe frequently report seeing faces in inanimate objects, such as clouds, trees and even on the face of the moon.
Hawaii leads the nation in steel-framed homes Many are shocked to learn the Luau State, full of lush jungles and immaculate beaches, leads the nation in steel-frame con-
struction. In fact, contractors are 70 percent more likely to use steel frames in new home construction than the traditional wood twoby-fours they used in the past. ese types of materials are most frequently used in multifamily housing, and are not as commonly used in single-family structures. Contractors are choosing steel for a wide variety of reasons. For one, steel doesn’t warp or shrink. It also doesn’t rot and is essentially termite proof, which allows it to last far longer than wood. Environmental advocates say it’s a very green choice as far as building materials go, especially since beams are frequently recycled from old automobiles and appliances. It also makes for stronger connections; in the age-old argument of being screwed versus being nailed, most everyone will agree that screwed in metal construction is clearly the way to go. Man drives stolen backhoe to Philly to sell for scrap A Pennsylvania man found himself in quite a bit of hot water after authorities arrested him for backhoe theft. In November, police reports showed that 33-year-old William Pusey pilfered a $125,000 backhoe from a construction site about 30 miles outVolume 7; Issue 1
side of Philadelphia. Pusey was clearly unaware that running oﬀ with such an obvious object, like a massive piece of construction equipment, would attract slightly more attention than if he five-finger-discounted a pack of chewing gum. Unsurprisingly, the backhoe’s owner was able to locate the vehicle through the use of a global positioning device, and Pusey and the backhoe were recovered at a Philadelphia scrapyard a short time later. Law enforcement oﬃcials estimate it took the man about two and a half hours to make the trip. Fire hydrants: A scrap thief’s target of choice Communities throughout California are reporting an ever-growing problem: scrap thieves are running oﬀ with fire hydrants. A single hydrant can fetch upward of $300 at scrap yards, according to sources, and buyers are failing to ask how, when and where the hydrants were acquired. Stealing a metal hydrant isn’t the easiest task—if the water source isn’t properly turned oﬀ, a 100-foot spout of water will gush into the air. e state has since passed laws making it illegal for scrap yards to possess municipal metal items.
283 tons of steel earmarked for bridge construction will be sold for scrap New York taxpayers are a bit miﬀed that 283 tons of steel that was supposed to be used for bridge construction is now being sold for scrap. e project was incepted by former Assembly Majority Leader Michael Bragman as a means of extending OnTrack rail service from the Destiny USA Mall to the transportation center and baseball stadium. Construction began in 1998 but was halted a short time later after Conrail argued the project was weakening their already in-place bridge that was situated just a few feet away. e Onondage County Industrial Development Agency took over the project in
2004 and was hopeful to get it back oﬀ the ground but by that time, construction funds had all but dried out. Plus, the steel had degraded so much since its purchase date that using it was out of the question. Sources close to the project expect the steel will have a scrap value of somewhere between $50,000 and $100,000.
Arizona-based recycling company finds itself in hot water for buying stolen cars More than 12 employees at Phoenixbased Hendrix and Co. Recycling have been pulled out of the frying pan and tossed into the fire after an investigation by the Arizona Department of Public Study determined they were buying stolen cars for scrap metal. Not only is receiving stolen property illegal, enabling car thieves by financially incentivizing their crimes is also against the law. A total of 15 warrants were served at Hendrix salvage yards, said sources close to the investigation. Criminals often know just where to turn to pawn stolen items, and when a salvage yard has agreed to shell out big bucks for the results of grand theft auto, word spreads like wildfire. e defendants face a laundry list of charges including money laundering, conspiracy, operation of a criminal enterprise, fraudulent schemes and traﬃcking stolen property. e Maricopa County Attorney’s Oﬃce said they’ve been working on the case for more than a year. Hendrix and Co. Recycling Company has not released any public comments. Volume 7; Issue 1
Guns for all: cost-effective 3D printer works in steel Fabricating firearms with 3D printers isn’t news—scientists developed the technology years ago, but printers capable of making plastic objects were much more prevalent (and inexpensive) than those capable of using metal. However, technology news outlets reported in December that scientists at Michigan Tech developed a relatively cheap printer that fabricates metal objects. e new printer, which is controlled by a Linux-system computer, cost just under $1,200 to build, and its creators have already produced simple shapes such as steel sprockets. e process begins when steel is melted down using a cost-eﬃcient gas-metal arc welder to prepare it for printing. And while do-it-yourself firearms were not the primary intention of the Michigan Tech Open Sustainability Lab’s project, they concede it will be possible, along with a host of other futuristic gadgets. In a press release announcing the project, Joshua Pearce, an associate professor in materials science, said “we are within reach of a Star Trek-like, post-scarcity society, in which ‘replicators’ can create a vast array of objects on demand, resulting in wealth for everyone at very little cost.” SO \
Easier said than done: Resurrecting the Concordia It’s been well over a year since the Italian cruise ship Costa Concordia sank after running ashore at Isola de Giglio. e ship collided with a reef and the ship grounded, and to date, it’s one of the largest ships ever to be fully abandoned. e ship, which measured more than 300 meters from bow to stern, contained more than four times the steel used to construct the Eiﬀel Tower. ose involved in collecting the Concordia said getting it up was one thing, but keeping it from going back down would be another. e entire operation was expected to cost more than 600 million euros; the ship originally cost 442 million euros to build. e wreck was eventually set upright in September and is expected to be scrapped in mid-2014.
Man finally charged in decades-old murder of Bethlehem Steel employee Sixty seven year-old Richard Keiper thought he committed the perfect crime. He killed Bethlehem Steel worker Alfred Barnes, robbed him and stashed his car several towns over. From there, he evaded a criminal investigation for 45 years by joining a traveling carnival and settling into life as a carnie. Barnes’ body was found by hunters a few days after the crime. Police did start to eye Keiper as a suspect three years after the incident took place, but they didn’t have enough evidence to make an arrest. Keiper, who has been living in Boyd, Texas, said he confessed to the crime a few months back after being once again questioned by authorities. ey said new information had surfaced in the murder, and Keifer had once again become a person of interest. He now faces one count of robbery and murder and is being held without bail.
GreatEXPECTATIONS for 2014
he year 2013 came and went and, in the end, did not make that much of a diﬀerence. Sure, major economic crises were avoided even if it was just barely in some cases, but in many ways it was a forgettable year in terms of major global economic recovery. All hope is now being vested in the New Year. Will 2014 live up to the high expectations? e US seems to be on the verge of the long awaited breakthrough year after the nasty recession of 2008/2009, as the latest data point to a solid year. e Eurozone seems to be stable— at least for now. e BRIC countries have lost much of their luster, but China has overcome a temporary weakness and is back to a strong growth pattern even though it is understandably not at the torrid pace of years past. Mature economies, such as most Western countries, are poised to take over a leading global role again. Last year the BRICs contributed a combined $458 billion to global GDP growth and the G4 (US, Japan, Germany and Britain) $360 billion. It is expected that 2014 will see a reversal of sorts: the BRICs will contribute $500 billion and the G4 $544 billion to global growth. America will contribute more than China, and Japan more than India. e Federal Reserve of the US will attract a lot of attention, including bidding a drawn-out farewell to an old friend—the “quantitative easing” program spearheaded by the US Federal Reserve. Despite all its naysayers, it has worked marvelously well since its inception in 2009. ere is a sharp diﬀerence between the QE-adhering countries (e.g. US, UK and Japan) and the stubborn and misguided insistence on austerity measures of the eurozone. is tale of two diﬀerent approaches will continue to stay in sharp focus in 2014. A lot of gloomy anniversaries will be observed in 1914 (100th anniversary of the outbreak of World War I and 75th for WWII), so let’s stay optimistic on the economic side and predict that the growth climate will be mostly sunny with very few thunderstorms building up. e outlook is not too bad. Welcome 2014 and its promise of reinvigorated global growth! Americas: Hopes are high for 2014, and the third quarter of 2013 seemed to be a harbinger of things to come when annual growth broke through the 4 percent mark. Earlier, more conservative estimates of around 2.6 percent were revised optimistically to just above the 3 percent mark. Mexico’s growth in 2013 will likely drop to 2.9 percent, down from 3.9 percent in 2012. As fiscal and energy reforms are beginning to show a positive impact, the growth rate for 2014 should accelerate to 3.8 percent. Meanwhile, Canada’s economy is joined at the hip with the US and will follow its neighbor’s growth pattern. Down south, Brazil’s timid rally will continue but it will remain behind the other BRIC countries and behind the high expectations prevailing in the country ever since the economy was somewhat unshackled and took oﬀ a few years ago. Bringing down the inflation rate will feature prominently next year in Brazil. On the other hand, hapless Venezuela will continue to struggle with, well, just about everything.
Venezuela enters 2014 as the worst economic performer in Latin America as of late 2013. Inflation will be up again and may well be above 50 percent. So, watch for continued food shortages, US dollar shortages and general mayhem. GDP could actually contract by 0.5 percent this year. Steel Production North America YTD November 2013 (‘000 mt): 109,293mt (-2.2%) Steel Production South America YTD November 2013 (‘000 mt): 42,397mt (-1.5%) Total Vehicle Production in Nafta countries YTD November: 15,392,051units (+4.3%) Total Vehicle Production US November 2013 YTD: 10,291,391 units (+6.9%)
GDP – latest quarter Consumer Prices latest compared to previous one and previous year and forecast 2014
Industrial Production year-on-year
Steel Production YTD November ‘13 in 000 mt and compared to last year
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drill by now. e United Kingdom will continue its recovery which will be slightly stronger than the one of its neighbors across the channel. e QE program will continue to help as long as it remains in place. Barring any unforeseen crisis, the housing market will continue to recover.
Steel Production November 2013 year-to-date in 000mt and compared to last year: European Union (EU 27): 152,464mt (-2.8%) Other Europe: 33,379mt (-3.1%) CIS Countries (6): 99,319mt (-2.8%)
GDP-latest quarter compared to previous one and forecast 2014
Consumer Prices latest and 2012 number
Industrial Production year-on-year
Steel Production YTD November 2013 in 000 mt and compared to last year
31,981 (-3.2%) *Y.O.Y.
Asia: China has a new leadership and with it an economic outlook that has been tempered in priorities. e focus has shifted away from full throttle growth at all cost to a more moderate but sustainable growth. A relatively moderate growth rate of “only” 7 percent seems to be acceptable now as eﬀorts continue to defuse the still-looming credit bubble. Entering this year, banks have outstanding loans and other credit arrangements worth 200 percent of GDP. e estimated outstanding amount of US$24 trillion is roughly as much as the combined outstanding loan amounts of US and Japanese banks. It is a very distinct Chinese problem since the core of the banking system is still state-owned, and the Bank of China under the watchful eyes of the central government will have to address this problem no matter
what. Japan, on the other hand, will continue to pursue its bold and very aggressive quantitative easing problem. Every month the Bank of Japan is purchasing 5.5 trillion yen, almost as much as what the US Federal Reserve has been doing for the US economy (which is more than three times the size of the Japanese economy). Watch for the yen to continue to stay weak and inflation to tick up slightly. Both of these consequences are the totally intended by the Bank of Japan and Prime Minister Abe. Elsewhere, India’s economy might just manage to grow around 6 percent but will suﬀer from continual high inflation, but the weakening rupee may actually be helpful by boosting exports.
Industrial Steel Production YTD Nov Production latest 2013 in 000 mt and compared twelve months
GDP – latest quarter compared to previous one and forecast 2014
Consumer Prices latest and 2012 number
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to last year
Europe: ankfully, the eurozone will stay out of recession for 2014. Diﬀerent think tanks have diﬀerent numbers for the actual growth, but there is a consensus that it will be an underwhelming rate of around 0.8 percent. Europe (EU plus Norway and Switzerland) will see a more upbeat growth of 1.1 percent. e big scourge in Europe will continue to be unemployment. e eurozone will struggle to improve on the current 12.1 percent rate and hordes of young people will be stuck in unemployment or, at best, under-employment. Before we forget: Greece will be running into another crisis in March of this year and it will need more financial assistance from its fellow Euro members. Watch for fiery debates again as well as protests in Athens and beyond and last minute “historic” deals. We know the
Industrial Steel Production YTD Nov Production latest 2013 in 000 mt and compared twelve months
GDP – latest quarter compared to previous one and forecast 2014
Consumer Prices latest and 2012 number
to last year
Africa / Middle East: Expect to find the majority of the top 10 fastest growing economies in 2014 in Africa and the Middle East. is is the good news—the bad one is that most countries in Sub-Saharan Africa will remain stuck in abject poverty. Political upheavals in the Middle East as well as in Africa will be the major threat to a meaningful growth. e MENA (Middle East / North Africa) region will grow around 4 per-
cent while Sub-Saharan Africa will expand its combined GDP by 5.2 percent. Growth in Nigeria and Angola will remain robust while warravaged Iraq and Libya will see an expansion of above 8 percent. Surprisingly, South Sudan is expected to be the fastest growing economy in 2014 (increasing 35 percent), but Africa’s lingering nemesis, civil war, could possibly undo this development.
GDP-latest quarter compared to previous one and forecast 2014
SpecialFocus: Hiccups in the Panama Canal expansion ere is no question that the Panama Canal gave a decisive impetus to global trade and to the rapid rise of the United States as an economic superpower. With growing global trade and ever bigger ships and tankers crossing the canal, the Panama Canal Authority (PCA) authorized major technical improvements for the canal by expanding and widening the locks. Now the story gets to be a bit murky. e winning bid was won by an international consortium led by Sacyr, a Spanish construction company. Other partners came from Italy, Belgium and Panama itself. e winning bid was an astonishingly low US$3.1 billion, even though the Panamanian government had estimated total costs of around US$5 billion. e losing bidder was Bechtel, a well known American engineering company, who famously stated that one could not even buy the cement with the funds of the winning bid. Well, the Sacyr consortium claimed new technologies and special building material that justified their bid amount. en, a nasty surprise surfaced in January 2014. Sacyr announced that it would stop the project unless the PCA hand over an additional US$1.6 billion because of cost overruns. e biggest factor was, well, the cement. e original cement mix used for pouring the concrete was rejected by Panamanian civil engineers and Sacyr had to procure a more expensive variety. e gigantic project came to a halt as the PCA insisted on honoring the original bid. In the meantime, negotiations have started involving government delegations from Spain and Italy. e PCA has oﬀered more funds amounting to significantly less than what was asked for as well as a moratorium on repaying previous advances. No matter what the outcome, it is clear that the completion of the expansion project will not happen this year as originally scheduled. For Panama, the completion cannot come soon enough—the Panamanian government currently generates US$1 billion in revenues from the canal and with the expansion this number is expected to jump to US$4 billion. e canal project is responsible for 10,000 direct jobs and contributed to two years of double-digit growth of the Panamanian economy. is enviable record has been put into jeopardy and the planned festivities for the 100th anniversary this year will undoubtedly less festive.
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REBARPOCALYPSE Is the landscape for rebar imports in the US is about to get bleak?
host-town trading oďŹƒces. Empty piers at US ports. Half-filled ships waiting at origin ports and nearly-bare intermodal containers waiting at train stations south of the border for something, anything to fill them. While these images sound like the establishing shots for a new dystopian action film, itâ€™s actually a prophetic peek at US import market sometime next year, once the USâ€™ main outside sources for rebar have been strong-armed out of the picture.
Okay, not really. Rebar only accounted for about 4 percent of the US’ total steel imports in 2013, according to government data, and even if the worst-case outcome of the current trade case against Turkey and Mexico comes to pass, trading oﬃces and ports will still be as full and busy as ever, regardless of what some doomsayers are predicting. In fact, there are several very diﬀerent pictures developing for the 2014 rebar import market: the rosy, unencumbered market dominance of US domestic mills; the bleak, global-market impacting dread of US-based traders; and the cool, “this too shall pass” shrug from foreign mills. e final determination of the US Department of Commerce (DOC) and International Trade Commission (ITC) in the antidumping and countervailing duty case against Turkey and Mexico (including the filing of “critical circumstances” petitions) will be either the best or worst thing to happen to the US rebar market, but regardless of who wins, many in the industry are more worried about the potential for unintended consequences.
From Rumor to Preliminary Ruling Import sources started to raise US mills’ hackles as far back as 2011, the first year that the economic recovery started to become evident. After 183,000 metric tons of rebar arrived into the US in the first quarter, US rebar mills scrambled to oﬀer “foreign fighter” deals and other incentives to retain their position in an already-weak market. US-based distributors told SteelOrbis at the time that mills hoped the Q1 2011 import trend was a fluke, because if the trend continued throughout the year, or became a recurring event, “something would have to be done.”
Imports more or less leveled out for the remainder of the year, but when Q1 2012 rolled around, so did another flood of imports—this time, with much more force. January 2012 saw around 124,000 metric tons of imported rebar arrive into the US, a level not seen since well before the economic crisis. When import levels failed to dip signficantly in the following months, rumors ran rampant that an antidumping (AD) petition filing was right around the corner. However, as with the previous year, imports leveled out for the remainder of the year (aside from a November spike), which took the wind out of US mills’ sails—one of the determining factors before filing an AD petition is a longstanding pattern of significant import tonnages, extremely low prices, or both. While the import flood of Q1 2013 was not as strong as 2012 (just over 321,000 metric tons arrived in the first three months), it oﬀered another, almost damning contrast—despite a few dips, the flood more or less sustained further on into the year, with 129,000 metric tons arriving in May, 91,124 metric tons in June, and 110,889 metric tons in September. Finally, US mills had the “pattern” they needed to file a worthwhile petition against Turkey and Mexico. On September 26, the US DOC formally
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initiated investigations into Turkish and Mexican rebar, estimating dumping margins of 48.82-66.70 percent for Mexico and 35.01-36.99 percent for Turkey. e ITC scheduled a vote for its preliminary injury investigation for October 18, but when the US government shut down in October over budgetary squabbles, the ruling was delayed for an indeterminate amount of time. US mills and traders weren’t left on the edge of their seats for long—the ITC ruled on November 1 that there was a “reasonable indication that the US steel industry is materially injured by reason of imports of steel concrete reinforcing bar from Mexico and Turkey that are allegedly sold in the United States at less than fair value and allegedly subsidized by the government of Turkey.” As such, the aﬃrmative determination kicked the next decision back to the DOC, which would continue its investigations. Before further rulings, however, anonymous sources confirmed that US rebar mills filed a “critical circumstances” allegation in early December in the ongoing AD/CVD investigation of rebar from Turkey. e allegation, which claims that imports increased after the initial filing of the AD/CVD petition (compared to a period of time before the initial filing), required a documentable increase threshold of 15 percent or more by the
Another point of view:
Namik Ekinci, Chairman of the Turkish Steel Exporters Association (CIB)
e critical circumstances allegation filed by US petitioners in December was not unexpected. e critical circumstances findings are fairly rare and require fairly significant margins and large influxes of imports to be successful, and there are a few important points to bear in mind: • In the subsidies case, critical circumstance may be found if there is an export subsidy or import substitution subsidy involved that violates WTO rules. • In the dumping case, critical circumstance requires a finding that there is a history of dumping in the case (the last sunset review proceeding established there was NO dumping), or a finding that the importer knew that the product was likely being dumped. In general, in determining whether the importer “knew” about dumping. • In addition to the above factors, the US must find a massive increase in im ports (at least a 15 percent increase) comparing the three-month period after the petition was filed (Sept–Nov) with the period before the petition was filed (normally June-August). In this case the petitioners have requested that the comparison period be backed up to May 2013 because Turkey “should have known a case was coming.” is is a nonsensical argument. We do not anticipate Commerce changing the comparison period. e US is supposed to take into account seasonal factors in its critical circumstance analysis which is relevant in this case. In addition, the US looks at percentage of US consumption accounted for by imports in considering increases in imports. Finally, note that critical circumstances are not found if there is no present injury found. When we analyze the figures between Turkey and the US there is a decrease in Turkey’s rebar export. If critical circumstances are found the can impose duties retroactive 90 days prior to the preliminary determination. e CVD preliminary has been pushed out to February 19 already, so November 19 would be the possible start date for CVD, later for dumping once the preliminary is pushed out.
the ITC to make aﬃrmative determinations due to their much-higher standards. But regardless of how slim (or not) the chances are, traders backed oﬀ from Turkish and Mexican orders in December, turning instead to various alternate sources until the AD and CVD rulings in February 2014.
Deciphering Intentions In fact, the well-timed backing-oﬀ from Turkey and Mexico, just when orders traditionally soar for the Q1 flood, has left many wondering if that was not the intention of US mills all along. Many in the Turkish steel industry have pointed out that proving Turkish mills have dumped rebar in the US will be nearly impossible. As stated above, US mills claim Turkish rebar has been imported Volume 7; Issue 1
in the US at dumping margins of around 35 percent, which would mean that Turkish mills are either exporting rebar to the US at 35 percent of their production cost or 35 percent below the average sales price in the Turkish domestic market. Considering that the CFR import price of rebar from Turkey to the US has averaged around $600/metric ton in the last year, that would mean production costs in Turkey would have to be around $925/metric ton (which they aren’t) or domestic prices in Turkey would have to be around $925/metric ton (which, again, they aren’t—not even close). is is where the countervailing portion of the petition comes in. US mills have long suspected that Turkey’s steel industry is supported by the state in various covert ways—
DOC in the two periods of comparison (three months each). Additionally, US mills relied on another provision of the DOC’s critical circumstances regulations: that importers, exporters or producers had reason to believe that a proceeding was imminent—US rebar mills alleged that there was speculation about the case as early as May 2013. In addition to the substantial imports from Turkey arriving that month, a representative from the US industry testified about Turkish imports during a sunset review hearing involving rebar duties from other countries, plus some members of the Turkish steel industry met with members of the DOC and US Congress in June 2013 to dissuade them from initiating a trade case on Turkish rebar. As such, US mills asked the DOC to set the comparison period from May through September 2013 (when, according to US import data, Turkish rebar imports totaled 323,295 metric tons), with a base period of December 2012 through April 2013 (when Turkish rebar imports totaled 280,181 metric tons). e diﬀerence in import levels between the two periods is 15.39 percent, meeting the DOC’s 15 percent threshold. A couple weeks later, Mexican mills were slapped with the same allegation, although unlike the critical circumstances filing against Turkey, US petitioners chose comparison periods of before and after the initial AD filing, alleging that rebar imports from Mexico increased 19.58 percent from September through November 2013, compared to the period of June through August 2013. e filing also claimed that importers “knew or should have known” that Mexican rebar was being sold at dumping-level prices due to the alleged margins exceeding the DOC threshold of 25 percent. Because several US-based traders didn’t believe critical circumstances petitions would be filed, and continued to oﬀer and book rebar orders from September on, many justifiably flipped out at the possibility of retroactive duties being applied. However, others have adopted a more “zen” response— although it is routine for the DOC to make aﬃrmative determinations in critical circumstances cases based on statistical calculations alone, it is reportedly much less common for
CoverStory lowering mills’ production costs drastically to give them the margins and volume capacity necessary to flood the US market. While this allegation is much harder to prove, it is based on mills’ belief that that US mills have a “fundamentally diﬀerent philosophy” than foreign mills when it comes to the free market—retiring Nucor CEO Dan DiMicco said as much during a conference presentation in June. He also lambasted Turkey’s steel industry in general, wondering how much financial sense it makes for the country to export two-thirds of its total steel production to an already-overstuﬀed global market. Turkey’s market philosophy aside, many in the US steel industry are skeptical that the US DOC will conclude the case in favor of US mills—but even if they lose, it will still be considered a win. e black cloud hanging over rebar imports in the US in the last quarter of 2013 had an immediate eﬀect on US domestic spot prices. Combined with strong scrap prices and decent demand levels, US mills announced price increase after price increase—while moderate in size, each increase was immediately absorbed into the market. If the DOC makes a final determination in 2014 that duties against Turkey
and Mexico are not justified (or levels negligible duties against them), and rebar imports pick up where they left oﬀ, US mills will at least have an end-of-year sales boost to leave shareholders smiling once quarterly and yearly results come out in late January.
The Law of Unintended Consequences But what would happen if the DOC levels heavy dumping margins against Turkey and Mexico, eﬀectively shutting them out of the US market? Unfortunately, it might not be as easy for US mills as scooping up former import customers. First, there are alternative import sources to consider. Spain, Portugal, Korea, Japan and Taiwan have all submitted oﬀers to US-based traders since the AD/CVD petition was filed in September. In November, the US imported 9,127 mt of rebar from Spain and 6,097 mt from Portugal, while 2,141 mt arrived from Korea in December. Most interestingly, 10,555 mt of rebar arrived in December from Peru— which had previously registered little to no rebar imports (or imports of any other long product, for that matter) during the last decade. And therein lies a threat to the US rebar Volume 7; Issue 1
market that US mills are either unaware of, or purposely ignoring—unlike many finished steel products, rebar is relatively cheap to produce, and the electric arc furnaces that convert scrap into rebar are relatively easy and inexpensive to construct in nearly any region that has access to steel scrap. If the US steel industry succeeds in snuﬃng out its two main sources of imported rebar, more sources will crop up in their place. It might take a few years, but it’s not inconceivable to imagine several Latin American, Caribbean, or other regions in close proximity beefing up their steel industries to supply rebar and other steel products to the US. “When even a country as small as Latvia is exporting nearly a million tons of rebar a year,” said one Gulf Coast-area trader, “it should be clear that no one ‘owns’ the US’ import market share—anyone can fill the void.” Another unintended consequence of a ruling against Turkey and Mexico would be the eﬀect it would have on the scrap relationship between Turkey and the US. e vast majority of Turkey’s scrap imports come from the US—about 4.6 million metric tons in 2013 as of October, compared to 2.1 million metric tons from the United Kingdom, 1.7 million metric tons from Romania, and 1.6 million metric tons from Russia. In turn, approximately 7 percent of Turkey’s total rebar exports are destined for the US. Taking US-bound rebar exports out of the equation will naturally result in Turkey using less scrap (unless mills can somehow divert production elsewhere). How much this would aﬀect the consumption and purchase of US scrap is up for debate, but several sources mentioned that it could put a dent—however minor— in the amount of scrap the US sends to Turkey. In addition to the US being Turkey’s top source of scrap, Turkey is the US’ top destination (3,630,389 metric tons in 2013 as of August, according to government data). US export scrap prices have been increasingly influential in US domestic scrap prices over the last few years, and sources are certain that the eﬀect of less Turkish-bound scrap will trickle down into the domestic market. Availability will increase, which will soften prices—on the East Coast primarily, with ripple eﬀects
The bump in US rebar spot prices during Q4 2013/Q1 2014 could be short-lived. including Iraq, UAE, Yemen, Saudi Arabia, Israel, Libya and Ethiopia. In order to gain greater market share in those areas, Turkish mills might have to oﬀer competitive pricing, which would only be possible by keeping raw material prices down. And if they are not able to negotiate low-enough prices from US scrap producers, than even more of Turkey’s scrap supply will have to be sourced elsewhere, making an even greater dent in the US export scrap market.
The Eternal Struggle of Supply and Demand It is well known that the US consumes far more steel in general than it produces domestically, leaving imports to pick up the slack— according to the American Iron and Steel Institute, the import market share was 22 percent in November. And judging from perspectives across the US supply chain, including a bullish outlook for 2014-2015 from Gerdau CEO Andre Gerdau Johannpeter in a conference call in September, demand for rebar in the US is slated to strengthen. But if
Turkish and Mexican rebar imports are out of the picture, will that inspire US rebar mills to increase capacity utilization to fulfill the US market’s demand? Probably not. “More production means more supply which means lower prices,” said one Midwest rebar distributor. “Mills have worked too hard to get prices where they are now to let them slip.” Distributors in the US are also the beneficiaries of high mill prices, but their end-use customers might not be so agreeable to a supply squeeze. In that event, distributors foresee the rise of alternate import sources. As mentioned before, several rebar-producing countries stepped up to the plate during fall 2013 when Turkish and Mexican mills came under a cloud of antidumping suspicion, although their price ideas were nowhere near attractive enough to take Turkey and Mexico’s place. However, if the void they leave becomes more than a temporary situation, it’s very likely that US customers will turn to Portugal, Spain, Korea and the rest even if the margins between their oﬀers and US domestic spot prices aren’t exactly wide. And as the law of unintended consequences dictates, the eﬀect of increased rebar exports to the US from those countries—and necessary increase in scrap consumption— could have a subsequent impact on the US scrap market. Taiwan is the US’ number two destination for export scrap, followed by Korea in the number three spot. Increased rebar exports to the US could mean increased scrap imports from the US, although from the West Coast, not the East Coast ports that serve Turkey. How much influence West Coast export scrap prices have on the general domestic US scrap market is debatable, but market dynamics could shift with export volumes. Of course, nothing will be clear until the DOC ruling in February, and even then, the ripple eﬀects of a ruling either way will take time to absorb in the market. While it’s unlikely the DOC will find no injury in its final determination, there’s always the possibility that final AD/CVD margins will be so low that Turkish and Mexican mills will continue to oﬀer rebar to the US, at only slightly higher price points. And in that case, there’s always the possibility of another import flood Volume 7; Issue 1
in a future first quarter, rendering the US import landscape as abundant then as it is bleak SO now. \
westward. And while US domestic rebar mills have made a concerted eﬀort in 2013 to divorce rebar transaction price trends from monthly scrap price fluctuations, customers are still aware of raw material trends and will not be as willing to absorb price increases if they know scrap prices are weak. erefore, the bump in US rebar spot prices during Q4 2013/Q1 2014 could be short-lived. By Q2 2014, export scrap’s ripple eﬀect could solidify, dragging US rebar prices down despite mills’ eﬀorts at pushing up the market with import scare-tactics. ere are also consequences that might not have an immediate eﬀect in the US market, but could make an impact later once global dynamics come into play. As mentioned above, Turkey could very well maintain rebar production levels and oﬄoad the excess to other destinations. Aside from the US, Turkey sends most of its rebar to the MENA (Middle East, North Africa) region,
n early 2013 Prime magazine rolled out a series of predictions for the year: which steel producers were most likely to invest in new facilities or beef up capacity? Which were most likely to expand downstream or get acquired? After a year of newsworthy ups and downs, the answers to those questions and more have become mostly clear. is roundup of the class of 2013’s Most Likely list highlights whether last year’s alumni followed their predicted path, or diverged to a more exciting—or disappointing—trajectory instead.
Most likely to expand across borders Big things were expected for Deacero in 2013, and it seemed as if they were moving along at full steam ahead. roughout 2012, many US long product insiders believed the company would expand their market foothold by opening a wire rod mill on US soil, and the reasoning made sense—in February 2012, the US Wire Rod Producers Coalition filed a petition alleging that Deacero and Ternium Mexico S.A. de C.V. were responsible for a surge in imported wire rod in gauges below the nominal diameter of the wire rod covered by the standing antidumping duty order in an eﬀort to evade them. at September, the DOC confirmed its preliminary determination that “wire rod with an actual diameter of 4.75 mm to 5.00 mm by Deacero S.A. de C.V. constitutes merchandise altered in form or appearance in such minor respects that it should be included within the scope of the order on wire rod from Mexico.” Ternium Mexico S.A. de C.V. was exempt from the determination. Two months later, the DOC calculated a new dumping margin for Deacero-produced wire rod of 12.31 percent, less than the current dumping duty deposit rate of 20.11. With such stringent complications placed on Mexico’s wire rod export market, the idea of opening up a wire rod mill in the US would have made tremendous business sense. While Deacero Chairman Raul Gutierrez
told reporters in December 2013 that he does expect a recovery in steel demand in 2014, for now, the company would not be making any new investments, including expansion into the US market. Instead, Deacero will focus on consolidating operations, which is expected to help sales within export markets. “In our case, we export 40 percent of our production and that can also help to trigger further growth.” he said. So where does this put the company in terms of an alumni of 2013 reunion? At a table in the back of the room with the rest of the graduates who have yet to leave town.
Most likely to get acquired e will-they-or-won’t-they speculation that surrounded the sale of yssenKrupp’s Americas holdings did pan out, although the eventual suitor arrived late to the dance. To recap, mid-2012 rumors solidified that yssenKrupp had a less than positive outlook for the Americas. At that point company’s Chief Executive Heinrich Heisinger admitted in a quarterly conference call that the company was considering its options for the Americas, including moving forward with the sale of its Alabama-based steel processing plant and Brazilian-based slab mill. In August of that year, Heisinger tossed out a for-sale price of approximate US$8.8 billion for both facilities, indicating there were a number of interested parties. Shortly after the announcement, South Korean steel giant POSCO submitted a letVolume 7; Issue 1
ter of intent indicating their desire to take over both plants, although Brazil-based CSN and Japanese steelmakers Nippon Steel and JFE Steel Corp. were also rumored to have tossed their hats into the ring. Although many within the industry had their chips on POSCO, CSN came to the table with an oﬀer for US$3 billion for both plants, which was significantly less than the US$8.8 billion asking price. In the end, yssenkrupp settled for even less. In late November 2013 yssenKrupp announced they would be postponing the publishing of their annual financial results because they were in exclusive negotiations on the possible sale of the Alabama steel plant. e finalization of the sale was announced on December 2. ArcelorMittal and Nippon Steel & Sumitomo Metal Corporation (NSSMC) announced they had entered a 50/50 joint venture partnership to acquire the steel processing plant for US$1.55 billion. Although yssenKrupp was unsuccessful in unloading the Brazilian slab mill as part of the deal, they were able to negotiate a six-year agreement in which ArcelorMittal and NSSMC would purchase 2 million mt of slab per year as a condition of the sale. ArcelorMittal said they would source the remaining slab balance for the Alabama steel mill from their plants in the US, Mexico and Brazil. A spokesperson for the company said the facility will help complement their existing auto business within the US, especially considering the NAFTA automotive market
Most likely to beef-up As rebar demand seemed ready to follow an upward trend in early 2013, many industry insiders predicted that Gerdau Long Steel North America’s Rancho Cucamonga-based mini-mill was well poised to ramp up production. Construction on the West Coast had finally started to show some improvement, and many within the rebar sector felt that beefing-up production was inevitable. At the end of 2012 government data showed that single-family residence starts in California rose 21 percent year-onyear during the six month period ending in October. Construction spending and other related data also pointed decidedly up, leaving an opening for supply to catch up to demand. Gerdau, of course, declined to comment on the status of their capacity utilization, saying that because they are a publicly-traded company, they only provide production numbers for the company as a whole (which would include all US mills plus the company’s South American operations). But Southern California fabricators said they haven’t seen anything that would indicate production has increased. “ey never seem to have any inventory, and I have a hard time getting steel from there,” said a California-based fabricator purchasing manager. “And they certainly haven’t given me any indication they intend to ramp up, although it would be about time.”
Others say that for the most part, the rebar that’s produced at the Rancho Cucamonga facility—which used to be Tamco Steel before Gerdau acquired it—is funneled to San Diego-based Pacific Coast Steel. Gerdau transitioned their general partnership with the company, one of the largest reinforcing steel subcontractors in the US, into full ownership in the spring of 2012. A representative from PCS said they have
seen an uptick in activity in the past 12 months, and their need for rebar has expanded. But in terms of the who, what, when, where, why and how of these tonnages, “mum” is still the oﬃcial word. It won’t be hard to find Gerdau’s minimill at the reunion dance. He’ll be standing along the back wall, wearing sunglasses and dark clothing in hopes of maintaining his mysterious façade. SO \
USConstructionRoundup Housing Starts*
$863.1 B ↑ 4.9%
↓ 1.6 points
Unemploy- Architecture ment Rate Billings Index 16.10%
917,000 ↑ 27.7%
↓ 1.4 points
1,036,000 ↑ 46.7%
↓ 2.5 points
853,000 ↑ 13.1%
↓ 1.3 points
914,000 ↑ 28.6%
↓ 3.4 points
$897.1 B ↑ 6.5%
↓ 3.0 points
$902.9 B ↑ 7.2%
↓ 3.2 points
↑ 12.6% ↑ 20.2% ↑ 15.0%
↑ 20.8% ↑ 16.1% ↑ 12.4%
891,000 ↑ 19.0%
↓ 2.2 points
$901.2 B ↑ 4.7%
↓ 3.4 points
Difference y-o-y Nov -13
↑ 13.9% ↑ 7.9%
↑ 4.2% ↑ 4.7%
↓ 2.4 points 8.60%
↓ 3.1 points
↓ 1.2 49.8
*annualized rate ---- e lapse in federal funding aﬀected the data collection schedule for the Survey of Construction, the source of data on new housing units started and completed. Data Jan.-Nov. includes revised figures ** Preliminary Sources: US Census Bureau, Associated General Contractors of America, American Institute of Architects
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is expected to reflect an approximate 15 percent increase in vehicle production in the next 10 years. e other alumni of 2013 won’t have a hard time spotting the mill formerly owned by yssenKrupp—she’ll be busy bouncing from table to table showing oﬀ the rock on her ring finger that’s nowhere near large enough to brag about.
Pricevolatility, overcapacity, and tradebarriers—oh my!
IREPAS event attendees discuss the many concerns face the global long steel industry, but positive economic signs abound
he 69th meeting of IREPAS (International Rebar Exporters and Producers Association) was held in Istanbul, Turkey on September 2224, 2013. ere were 120 producer representatives amongst the 407 registered delegates from 49 diﬀerent countries. Kim Marti was named as Chairman of IREPAS, replacing Ugur Dalbeler. Ioannis Meimaroglou, Chairman of the Raw Materials Suppliers’ Committee, confirmed that a record high number of 42 representatives attended the committee meeting in Istanbul. Meimaroglou stated that the raw material suppliers fully understand the diﬃculties steel producers are facing in selling finished products under prevailing market conditions, and their eﬀorts to reduce their costs, including the costs of raw materials. He went on to emphasize that scrap suppliers are indeed trying to reduce their scrap collection prices, while adding that they are facing some major issues. First of all, he pointed to the diﬃculty presented by domestic market competition in any country where scrap demand increases because of the introduction of new steel capacities, or because the winter is coming, or because steel mills want to take advantage of low scrap prices. Meimaroglou went on to say that scrap prices are influenced by prices of other raw materials, including iron ore and steel billet, which can be used—as they are now—as an alternative when prices allow it. He said that it is impossible to achieve the greater degree of stability that scrap suppliers are seeking in
order to better plan their medium-term activity. Due to unpredictable market conditions, scrap suppliers are keeping their inventories low, which in turn results in increased volatility. He also said that, when scrap prices are going down and margin expectations also diminish, a significant number of scrap collectors halt their activities, which leads to reduced scrap availability. Meimaroglou added that oﬃcial policies and regulations, especially in some countries, are completely hostile to scrap exports, aiming to limit them as much as possible. Furthermore, financing by banks—due to the general economical situation, but also due to problems which have arisen in recent years in the steel sector—is becoming more and more diﬃcult to obtain and more limited, Meimaroglou said, adding that the dollar exchange rate is becoming an important factor in cost creation, aﬀecting the market and competition in diﬀerent areas. In conclusion, Volume 7; Issue 1
he underlined the general view among all participants that scrap suppliers are currently going as low as they can in terms of prices while still managing to provide steel mills with regular supplies of good quality material. “Scrap exists. But we need real workable prices, allowing us to collect and to deliver properly to our clients,” he concluded. Representing the Traders’ Committee, F.D. Baysal said that the antidumping petition in the US against rebar imports from Mexico and Turkey has become a major concern for traders as they are worried Turkish and Mexican rebar imports to the US might stop while the investigation is being carried out. Turkish participants at the event, including steel producers and steel exporters, all stated that the dumping claim is groundless and that, even if a decision of injury is reached, dumping margins close to zero will be decided. Furthermore, the Turkish participants, including the Turkish Steel Exporters’
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more particularly in the UAE are performing quite well. He also indicated a number of challenges which the steel industry is facing, namely, volatility of prices, overcapacity in the industry, credit restrictions and trade barriers, while also stating that the steel trade is becoming more regionalized. SO \
Association, categorically denied that any government incentives were being provided for the Turkish steel industry. Some USbased traders speaking at the Traders’ Committee Meeting expressed their concerns regarding the lack of alternative sources of supply besides Turkey, stating they could not name any supplier country other than Turkey which “can supply rebar in any size, in any grade, in any volume and at any time.” Baysal said that traders are expecting scrap prices to go down further for a while
and then to stabilize, while iron ore prices are expected to decline for longer than scrap prices. Baysal also mentioned the possibility of an antidumping investigation being launched in the US against wire rod imports. Ugur Dalbeler, Chairman of the Billet Suppliers’ Committee, said that Turkish billet export prices have not been competitive in recent times due to upward pressure coming from scrap prices, leading to a 40 percent year-onyear decrease in Turkey’s steel billet exports so far in the current year. On the other hand, Dalbeler said that steel billet export suppliers from the CIS have more competitive prices and increased sales to Turkey as a result, also given the higher billet prices in Turkey. Dalbeler stated that the situation in the US market is now good, while the euro zone is reviving slowly in terms of steel market activity. “After a diﬃcult year in 2013, we hope to start seeing those old good days by 2015 and 2016,” he concluded. Kim Marti, Chairman of the Rebar and Wire Rod Suppliers’ and Producers’ Committees, stated that global rebar and wire rod demand is growing, with further growth also expected next year. Commenting that Europe is emerging from its recession and is witnessing a more positive construction outlook, which will drive steel demand higher, Marti added that the economic outlooks for the US, Europe and Japan are positive and, since these three economies account for more than 70 percent of world GDP, the general outlook for the global economy is considered to be positive. He mentioned that the European mills were adjusting their capacity carefully in line with demand, before going on to say that oversupply is still an overwhelming problem in the world steel industry, with some regions where capacities keep on rising, such as in China. Marti also said that steel markets in the Gulf region, the GCC and
Cyril Broussaud, Head of Ferrous Sales of the leading recycling specialist and scrap supplier ECORE Group, discussed Turkey’s growing demand for quality scrap and other topics with SteelOrbis Istanbul during the SteelOrbis Fall 2013 Conference & 69th IREPAS Meeting.
ounded in 1993, the ECORE group is a recycling specialist that manages the whole recycling chain for industrial groups as well as local collectives. To date the group has enjoyed constant growth of its volumes, new site implementations and increased turnover.
How does ETS (Emissions Trading Scheme) impact your business? What are challenges European metal recyclers are faced with due to EU’s emission regulations? CB: In our view, bigger European metal recyclers like ECORE will be best placed to comply with tightening environmental regulations. ECORE has invested in the latest technologies in anticipation of regulatory changes enabling us to oﬀer solutions to industries facing emission issues (i.e. ecofriendly transportation). In order to be compliant, companies will need to make investments, which will result in a redistribution of the market.
Do you think scrap suppliers in Europe are under higher cost pressure compared to their counterparts in the US or in the CIS because of the regulations? CB: European and US scrap suppliers share this common problem and we are all dealing with it. However the same cannot be said for developing nations who enjoy a clear cost advantage yet very regularly get hit with infrastructure problems that compensate for this advantage.
We know that ECORE has been in different locations in Europe with its collection and production sites. Is it possible to tell about these sites? CB: e ECORE group has a network of over 100 sites throughout Europe (France, Switzerland, Hungary, Romania, Germany, Belgium, Holland and Spain), China and India. e group currently operates from 12 sea ports and six river ports. We ship over 40 percent of our finished products by means of river or sea vessels. To which markets do you sell scrap? CB: Mainly Europe, the Mediterranean Region, and Turkey.
How do you see the Turkish market and what is your expectation for it in the near future? CB: As is widely known, Turkey is Europe’s strongest and most liquid market. We have observed an evolution whereby Turkish mills have reduced their tolerance for low grade scrap. We welcome this approach as it will result in higher proportion purchases of Shredded, P&S and domestic style HMS 1/2.
Envisioning the futureofexports
Have you observed any decline in Turkey’s scrap imports in 2013? CB: Due to the ongoing eﬀects of the crisis Turkey was not spared from unusual and sometimes unstable movements we have been able to observe in other markets. is is not unusual and is in line with trends seen globally. From a global perspective, while sales volumes of market players have declined in general, margins too are stretching due to competition. No great changes should be expected in 2014 as far as global market conditions are concerned.
In 2011 ECORE acquired Recylux in France, Luxembourg, the Netherlands and Belgium with 11 sites, strengthening your position in Europe. What can you tell us about the acquisition and can people expect there to be new acquisitions in the near future? CB: In addition to these we also acquired Metalifer Group in Eastern France, where Recylux was very present, giving us new opportunities along the Rhine river. ese acquisitions have given ECORE a better view on the market and how we will look to expand in the future.
Fadi Hraibi, chief commercial officer of Ukraine-based Interpipe, explained to SteelOrbis Istanbul the company’s vision regarding the steel billet market after commencing sales of the product in October.
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What type of billets do you produce for your own usage and what types are offered to your customers? What is the annual production capacity and what annual export volume do you expect to achieve? FH: Interpipe Steel can produce billets of carbon and alloyed steel grades with diameters
ranging between 150 mm and 290 mm. In particular, these steel grades may be used for the production of line pipe according to API 5L, ASTM, and GOST standards, as well as for the production of casing and tubing according to GOST and API 5 CT standard requirements. e designed billet production capacity rate of Interpipe Steel (1.32 million tons a year) has exceeded our own need for steel billets. In June this year, the mill reached a production capacity of 100,000-110,000 tons of steel billet a month, which fully covers the internal consumption of the company and provides us with the possibility of exporting up to 200,000 tons of steel billets annually in the years to come. In addition, the company previously announced the commencement of construction of Interpipe Steel’s second billet casting line. e launch of billet sales is the groundwork for the development of a customer base and volume of orders for future operations. Where will you export billets? FH: Consumers of Interpipe Steel products include manufacturers of pipe and wheel products. We consider the markets of Eu-
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rope, North America (the US, Canada and Mexico), and the Middle East as the key ones for steel billet sales in 2014. Our company has a long-standing experience of operations in these markets, and we understand the needs of customers in these locations quite well. Our advantages are obvious for the customers: the product is made at a state-of-theart mill, quality is guaranteed and the price is quite competitive. Forging facilities are also among the most promising consumers of the steel billets made by Interpipe Steel. At present the mill has developed steel grades of A350 LF2 and 42CrMo4 for the production of flanges and rings. A trial lot of such steel billets has been already sent to Europe for tests.
Do you sell billets to the Ukrainian domestic market? Who are your main customers there? FH: e domestic market for sales of our steel billets is quite thin; therefore the market is expected to show only some limited growth. At present, we are already collaborating with Ukrainian producers of railcar axles and we intend to continue this collaboration next year. SO \
What was the motivation of Interpipe in getting involved in steel billet manufacturing and what is the importance of billet production in the company’s overall production structure? FH: e steel billet made by Interpipe Steel is an independent product, though it has the same competitiveness as pipes and railway wheels produced by Interpipe. erefore it would be logical to consider Interpipe’s electric steel-melting complex as a separate business. e quality of steel billets produced at Interpipe Steel complies with all the technological requirements of European pipe and railway wheel producers. is is why we have every reason to assume that our mill’s billet products will meet good demand in the export markets. Export deliveries of billets to external buyers will ensure the growth of the company’s export revenues and eventually of the company’s income.
Dr. Veysel Yayan, general secretary of TCUD, explained the effect of declining steel output caused by higher input costs to SteelOrbis Istanbul during the SteelOrbis Fall 2013 Conference & 69th IREPAS Meeting.
Why did the significant growth observed in Turkish steel output following the 2008 economic crisis start to be replaced by reduced outputs this year? Will this declining trend in output slow down in the remainder of the year? VY: After 2008, Turkey’s steel output saw a gradual improvement and the country registered the best growth rates in crude steel output worldwide, with increases of 17 percent and 5.4 percent in 2011 and 2012 respectively. However, in 2013, Turkish electric arc furnaces reduced production levels due to the contraction in demand, increases in scrap prices starting from January and February not being reflected in finished steel prices amid idled capacities in the global steel industry, and also due to margins declining below $200/mt. In the middle of the year, the US and the EU extended the embargo on Iran to cover semi-finished steel products as well, resulting in a further loss of 500,000 mt in Turkey’s steel exports. On the other hand, the strike at Isdemir also caused a production loss of 650,000700,000 mt and a loss of 1.5-2 percent of the country’s total crude steel output. Putting all these factors together, in August Turkey’s crude steel output declined by 5.4 percent year-on-year. e 6.8 percent decrease rate in crude steel output at the beginning of the year had slowed down to 2.9 percent before the Isdemir strike. We had expected this slowdown to continue in subsequent months and to close the year with a stable comparison on year-on-year basis for monthly output. However, all these negative developments and the antidumping duty investigations the Turkish steel industry has faced recently have made the situation more diﬃcult. Making an optimistic forecast, I can say that Turkey will end the year with a 1.5 percent year-on-year decline for monthly
What remarks would you like to make on the antidumping investigations? VY: ese duty investigations have clearly got nothing to do antidumping, but are rather aimed at bringing forward protective measures in the guise of antidumping investigations. For instance, there was a 6.8 percent countervailing duty in Egypt. It was a measure implemented to protect their own producers and domestic market. is duty came into eﬀect although Egyptian producers had advantages in terms of labor costs and energy prices compared to Turkey. Egypt’s domestic prices are also much higher than those of Turkey. Egyptian producers wanted to further increase their profit margins.
Turkish steelmakers are usually family-owned companies which can survive on modest profits.
Dr. Veysel Yayan
It is same for Jordan, Morocco and the US. A profit margin of $70/mt is not enough for a US-based steelmaker because it wants to pay higher dividends to its stakeholders, while Turkish steelmakers are usually familyowned companies which can survive on modest profits. e US producers state, “You are buying scrap from us and produce steel locally, and then sell to the US at prices lower than domestic prices.” Yes, we buy scrap from them and process it without any kind state subsidy and sell these products in their country. But they are still not content with their own profits and resort to antidumping duty investigations. Besides, the representatives of US-based mills point out that this is not dumping, it is all about the export volumes and they are trying to limit these volVolume 7; Issue 1
How do you think the Transatlantic Trade and Investment Partnership will impact the steel industry with the free trade agreement with the EU already threatening the industry? VY: It will only strengthen the negative impacts of the free trade agreement with the EU on the steel industry. Maintaining the current free trade agreement would be irrational. EU representatives are fully aware of this situation. ey should not sign a unilateral agreement with the US if the free trade agreement with Turkey means anything to them. e free trade agreement currently provides the EU steel industry with advantages. Turkey exports one unit while importing two units. While this is not sustainable as it is, it is not possible to expect the Turkish steel industry to take on board the Transatlantic Trade and Investment Partnership as well. e EU should know this.
Would you like to comment on the situation as regards scrap imports? VY: ere has been no decline in Turkish electric arc furnaces’ share in total domestic steel production, meaning no decline in our scrap needs. However, when the EAF mills reduce their outputs, this is automatically reflected in scrap imports. Scrap imports are expected to indicate a decrease of around 3 million mt year-on-year for 2013. I am happy to say that there has been a 6 to 7 percent increase in domestic scrap generation and this is expected to continue. I believe that importing scrap will be necessary again in line with the increase in production. However, a small decline in scrap demand has strengthened the Turkish steel industry’s negotiating power a little in the international market. SO \
(Woody Harrelson) doesn’t take too kindly to the ruse, rounding up Rodney and his bookie and shooting them at point-blank range in the woods. Of course Russell vows revenge, but his criminal record prevents him from crossing state lines with a firearm (no, he isn’t worried about running afoul of the ATF—local cops/old friends physically stop him from leaving). His only chance, then, is devising a scheme to get the hillbillies to come to Pennsylvania instead. Russell pretends to be the new bookie in town (although it’s unclear how he would know the town needs a new bookie), eager to settle his predecessor’s debt with DeGroat. While the trap more or less works, luring DeGroat and his cronies into Russell’s terrirtory, bloody chaos obviously ensues with an abandoned steel mill surrounded by lush grass serving as an ironic backdrop (much like the old Bethlehem Steel mill pictured). And although Russell prevails, finally getting his revenge, it is unclear how satisfying his life will be from that point on. His brother is still dead, his father finally succumbs to his disease, and the girlfriend he was forced to abandon when he went to prison is pregnant with someone else’s baby. All he has left is his job at the mill and his freedom, but even those pluses aren’t secure considering he just committed another Volume 7; Issue 1
felony and it’s probably only a matter of time before the bodies strewn around the old mill are traced back to him. Nevertheless, “vengeance doesn’t satisfy” is clearly not the moral of this story. And although it might be tempting to reduce the moral down to “Better take that job at the steel mill or Jersey hillbillies will getcha,” that misses the mark as well. Beyond the desperation and vengeance that define the main conflicts and character motivations, the film oﬀers a bleak portrait of those the US steel industry has left behind, even though the industry itself is not that marginalized—the US is the third-largest producer in the world behind China and Japan. Yet it still isn’t the giant it was before globalization took hold, and all those abandoned mills aren’t going to suddenly resume production and transform the Rust Belt back into the Steel Belt of days past. But that doesn’t mean another industry can’t take its place. Whether it’s manufacturing, or innovative technology, or some other burgeoning sector just beyond the horizon, the imperative remains to give Rust Belt denizens more options in life. Without them, they’ll be forced to rely on more subversive means of survival. And as far as “Out of the Furnace” is concerned, no subversiveness SO \ goes unpunished.
or as fundamental as steel has been to the creation and expansion of America as we know it, it’s curious that it hasn’t appeared in another quintessential American industry—film—more than a handful of times in the past century. Of course, the steel sector itself isn’t the titan it was a century ago, rendering its once-flourishing regions of the country into a so-called “Rust Belt”. Life for those in this swath of land (comprising Pennsylvania, West Virginia, Ohio, Indiana, parts of Michigan and central New York) has seen a sharp reverse of fortune since its heyday, and the eﬀects of steel mill closure upon steel mill closure continue to ripple through the generations. “Out of the Furnace”, a new film starring Christian Bale and Casey Aﬄeck as brothers born and raised in “mill country”, examines one extreme of these ripple eﬀects—namely, what happens when someone tries to break free of the few career options that are left in a town that prosperity abandoned long ago. Rodney Baze, played by Aﬄeck, returns home to North Braddock, Pennsylvania from his fourth tour of duty in Afghanistan a changed man—while securing a job at the local steel mill seems to be the most reasonable way to transition back into civilian life, he just can’t step into the lifestyle established by his father (dying of disease most likely caused by a lifetime inhaling toxic fumes) and brother Russell (Bale, returning to the mill after a DUI-related stint in jail). e whole town lives and breathes steel, but Rodney would rather forge his own path, even if that path isn’t exactly legal. He joins an underground fight club of sorts, sacrificing his body and well-being for money even as his brother pleads with him to take work at the mill. When bouts at the local clubs aren’t lucrative enough, Rodney persuades his bookie to enter him in a backcountry New Jersey hillbilly fight so they can throw it and earn enough to walk away and make a new life somewhere else. Unfortunately, Hillbilly-in-Chief Harlan DeGroat
Steel in Film: “Outofthe Furnace”
China steel scrap, the global wild card By Peter Marcus, World Steel Dynamics
rom 2000 to 2012, Chinese apparent consumption of finished steel products rose at an average annual rate of 13.6 percent per year to 641 million mt. WSD contends that the obsolete scrap reservoir is comprised of steel consumed 10-40 years prior. Taking into account this massive growth in Chinese steel consumption from 2000-2012, the Global Metallics Balance System forecasts that the Chinese obsolete scrap reservoir will expand 10.9 percent per year from 64 million mt in 2013 to 222 million mt in 2025. e extent to which this is accurate may depend on the following: • e life cycle of Chinese infrastructure and commercial building projects that account for a great deal of the steel consumption during this period. • e price of steel scrap relative to the raw material cost to produce pig iron. High scrap prices induce greater scrap collection. • e price of alternate steelmaking metallics and raw materials. If the prices of spot iron ore and coking coal remain low, Chinese steel producers may have limited incentive to drastically change their steel making practices.
Assuming that China does, in fact, have a rapidly growing supply of steel scrap, this may lead to significant ramifications for both the Chinese steel industry and for steelmakers outside of China. Assuming no dramatic changes in the proportion of steel produced via the BOF and EAF steelmaking routes, obsolete scrap demand may be only 20 million mt higher in 2025 versus today, compared to an increase of 155 million mt in steel scrap supply. Currently, the Global Metallics Balance System estimates that an average Chinese basic oxygen furnace (BOF) metallics charge consists of 86 percent blast furnace pig and 14 percent steel scrap. A surplus of obsolete scrap may result in a shift towards greater scrap consumption in the BOF. A change in the proportion of steel scrap charged in the BOF to perhaps 20 percent would imply 174 million mt of scrap requirement for Chinese BOF steel production in 2025 compared to 142 million mt assuming a static 14 percent charge, an increase of 31 million mt of obsolete scrap consumption. Although WSD believes that it is increasingly unlikely that the Chinese steel industry will shift to a greater proportion of steelmaking via the EAF route, a shift from a current split of 90 percent BOF and 10 percent EAF
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to perhaps an 80 /20 percent BOF/EAF split in 2025 could increase obsolete scrap demand dramatically. Under this assumption, Chinese EAF production in 2025 would amount to 136 million mt and the scrap requirement for EAF steelmaking would be about 95 million mt, implying a 40 million mt increase in demand for obsolete steel scrap. Potential restrictions on the future exports of steel scrap from China are a major wildcard for the price of steel scrap (and other key steelmakers’ metallics) traded on the global market. In the absence of restrictions, a significant proportion of any surplus of Chinese scrap is likely to be exported to other regions, thereby increasing the metallics supply for the World ex-China and potentially reducing the overall price “level” in the metallics bathtub.
For additional information on WSD’s services, please contact us at: firstname.lastname@example.org Or visit our website at: www.worldsteeldynamics.com
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WAI’s next wire & cable adventure will take just two days in Circle City. 176-Stand Wire & Cable M ar ketplace || Net wor k ing || Tours || Joint AIST Technical S ession M ach iner y R oundtable || Equipment Forum || S afet y and Continuous I mprovement S egments WAI’s Operations Summit & Wire Expo 2014 will help you come up to speed with intense, peer-driven crosstalk about today’s plant management best practices. Save
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MERGERS & ACQUISITIONS
During the last quarter of 2013, businesses focused on expansion, increased efficiency and strategies that would enable them to increase market share. Acquisitions of raw materials projects and steelmaking ventures were most prevalent, and buyers hope the now-completed sales will bring a prosperous 2014.
ArcelorMittal-NSSMC JV acquires ThyssenKrupp’s US steel mill Global steel giant ArcelorMittal announced December 2 that it entered into a 50/50 joint venture partnership with Japan-based Nippon Steel & Sumitomo Metal Corporation (NSSMC) to acquire the Alabama-based steel processing plant yssenKrupp Steel USA (TK Steel USA) from German steelmaker yssenKrupp for an agreed price of $1.55 billion. e transaction, which is expected to deliver $60 million of annual synergies, will be financed through a combination of equity and debt at the joint venture level. e transaction includes a six-year agreement to purchase 2 million mt of slab annually from yssenKrupp’s Brazil-based steel mill TK CSA, using a market-based price formula. TK CSA has an option to extend the agreement for an additional three years at more favorable terms to the JV, compared with the initial time period. ArcelorMittal stated that the remaining slab balance for the Alabama steel mill will be sourced from ArcelorMittal plants in the US, Brazil and Mexico. ArcelorMittal will be responsible for marketing the product on behalf of the JV. e price ArcelorMittal will receive for its slabs will be determined by the volume, price and cost performance of the JV. e Calvert facility will complement ArcelorMittal’s existing auto business in the US. ArcelorMittal’s current facilities for the auto segment in the US are at high levels of capacity utilization and the NAFTA automotive market is expected to show an increase in vehicle production of approximately 15 percent over the next decade. is acquisition will also strengthen ArcelorMittal’s position in supplying the NAFTA energy industry, which is expected to demonstrate growing demand for energy pipe and tube products due to increases in oil and natural gas exploration and production. BlueScope to acquire OneSteel sheet and coil processing business On October 21, Australian flat steel producer BlueScope announced it agreed to acquire from Australia-based Arrium Limited its OneSteel sheet and coil processing and distribution businesses in Sydney, Brisbane, Adelaide and Perth. BlueScope will pay inventory value at completion (as of September 30 this was $23.1 million) for the assets and assumed liabilities and expects to incur net integration costs of $7 million. BlueScope said that the acquisitions will further improve the eﬃciency by lowering costs through the integration of these businesses with the company’s existing operations.
e acquisition is subject to Australian Competition and Consumer Commission approval. Completion was targeted for the end of the December quarter of 2013.
Anglo American completes sale of Amapá iron ore project UK-based mining giant Anglo American announced on November 4 that it completed the sale of 100 percent of the Amapá iron ore operation in Brazil to Zamin Ferrous Ltd., a private international mining group that has been operating in Brazil, following receipt of regulatory approval for an initial total cash consideration of $134 million. Anglo American stated they will use the proceeds to pay down debt. At that time, the Amapá project was in its initial stage and up to 30 million mt of iron ore per year was expected to be produced starting from 2020. e project includes a significant iron ore deposit and a 192-kilometer railway connecting the mine location to an existing port facility.
Volta Mining acquires iron ore project in Pilbara region On November 22, Australia-based iron ore company Volta Mining Limited (Volta Mining) announced it would acquire the Newman direct shipping ore project located in the Pilbara region of Western Australia. e project is in close proximity to existing and proposed third party railways. Volta Mining also stated that it is undertaking a capital raising to advance its current and newly acquired projects, including the Kango and Mbombo iron ore projects.
ICE acquires Singapore Mercantile Exchange, expands into Asian markets IntercontinentalExchange Group, Inc. (ICE), the leading global network of exchanges and clearing houses, announced November 20 a definitive agreement to acquire Singapore Mercantile Exchange (SMX) in an all-cash transaction. e acquisition will enable ICE to expand into the Asian markets. Under the terms of the agreement, ICE will acquire 100 percent of Singapore Mercantile Exchange (SMX), including the SMX Clearing Corporation (SMXCC), a wholly owned subsidiary of SMX and the clearing house for all SMX trades. SMX operates futures markets in Singapore across metals, currencies, energy and agricultural commodities. SMX will continue to be based in Singapore and operate as a separate recognized body with its own independent board of directors.
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Although some companies announced they would be idling capacity, others are moving along at full speed ahead. The latter seemed to be the most prevalent as 2013 came to a close, which may lend itself to market optimism in the first part of 2014.
EVRAZ to idle Delaware mill EVRAZ North America announced on October 14 that due to subdued market demand and the high volume of imports, it would suspend operations at its steel mill in Claymont, Delaware. Over the next two months, about 375 employees would complete processing and shipping of existing products and prepare the mill for idling. EVRAZ will consider restarting the operations as soon as market conditions improve. EVRAZ doesn’t expect any adverse financial eﬀect on its operations in North America as a result of this action, and customers of the Claymont mill will be served by other EVRAZ facilities in Portland, Oregon, and Regina, Saskatchewan. “We appreciate our employees’ eﬀorts to operate EVRAZ Claymont as eﬃciently as possible,” said John Zanieski, Executive Vice President - Flat Products and Recycling. “Unfortunately, market conditions continue to be challenging and low market visibility makes it diﬃcult to foresee when positive changes will occur.” All of the mill’s employees, with the exception of a small crew who will remain to maintain the site, have been issued Worker Adjustment and Retraining Notification (WARN). With the help of Governor Markell’s oﬃce, the company is evaluating options for resuming operations at the Claymont mill. EVRAZ Claymont makes steel plate and custom plate products for industrial customers. Total production volumes in H1 2013 and for the whole of 2012 were 189,025 tons and 383,590 tons, respectively. Vale prepares to start new Carajas Additional project Vale SA told reporters on October 15 it would soon commence its US$3.5 billion Carajas Additional 40 Mtpy project in Brazil as it expands production. According to Paulo Horta, the company’s North Ferrous Director, Vale expects to obtain the operational license for the project this month. e $3.48 billion Carajas Additional 40 Mtpy project consists of the construction of an iron-ore dry processing plant that will have an estimated annual output capacity of 40 million metric tons. ArcelorMittal Acindar to build new rebar mill in Argentina On October 22, global steelmaker ArcelorMittal announced its Argentina-based unit ArcelorMittal Acindar will invest $100 million in a new rolling mill in Santa Fe province, Argentina. e rolling mill with an annual production capacity of 400,000 mt will be built to manufacture steel bars for civil construction. e
project is expected to take 18 to 24 months to build, with operations expected to start in two years’ time. e new mill will enhance competitiveness and the company’s ability to supply both the domestic market, where there is growing demand for steel products for the construction industry, and export markets. e new rolling mill will also enable ArcelorMittal Acindar to optimize production at its special bar quality (SBQ) rolling mill in Villa Constitución, which in the future will only manufacture products for the automotive and mining industries.
American Steel Pipe announces $55 million expansion On October 31, Birmingham, Alabama-based American Steel Pipe, a division of American Cast Iron Pipe Company, announced it would expand its steel pipe operations, adding a processing facility to its North Mill. e facility will cost more than $55 million to construct. e company manufactures electric-resistance-welded (ERW) steel pipe in diameters from 10.75 to 20 inches in its South Mill, and 16 to 24 inches in its North Mill, and it produces ERW pipe up to 84 feet in length for the oil and gas industries. e new, 150,000-square-foot facility will house state-of-the-art testing equipment, including two hydrotesters, two ultrasonic testing machines and a new end facing system to bevel the ends of the pipe. e current processing facility will be decoupled from the North Mill and adjoined to the plant’s South Mill, doubling its processing capacity. e expansion is slated for completion in 2014, and the company is also making other upgrades to its North Mill, including a new marking system, steel skelp leveler, weld stand, flying cutoﬀ and seam annealers. US Steel to permanently close doors on Hamilton mill On October 29, US Steel Corp announced it would permanently shut down operations at its Hamilton, Ontario, mill at the end of 2013. e integrated mill, which US Steel acquired for $1 billion in 2007 from Canadian steelmaker Stelco, Inc. and had an annual capacity of 2.3 million tons before it was idled in 2010, will continue its coke-making and steel finishing operations at Hamilton. CEO Mario Longhi said the Hamilton closure is part of an initiative dubbed “Project Carnegie” that aims to reduce costs by about $50 million a year. In addition to the Hamilton shutdown, the company will close two coke batteries at Gary Works in Indiana, and let two 1 million ton per year iron ore supply contracts expire in 2013 SO \ and 2014.
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SteelOrbis Istanbul spoke with Ugur Dalbeler, CEO of Turkey’s Colakoglu Metalurji, about his tenure as chairman of IREPAS as he handed over his duties to Kim Marti of Celsa.
What evaluations would you make regarding IREPAS during the period of your chairmanship? UG: Time has flown by. My first IREPAS meeting was in Istanbul in 1987. e most interesting thing about the meeting for me was that two people were having a heated discussion. One of them was the moderator, while the other was one of the participants. What makes IREPAS diﬀerent is that it is interactive and productive. However, there is a significant diﬀerence between the concept of IREPAS today and the concept in the past. e biggest reason for this is the changing conditions around the world. Back then, it was as if we were forming a cartel-like structure. It was a gathering for producers operating in the same region to optimize their profits. is kind of thing is now prohibited almost everywhere. So we created a diﬀerent concept and I believe the result has been very good. IREPAS is trying to enable industry players to establish working communications between each other. To summarize, in the past only certain producers and traders were involved, but now almost all players, including financing banks, logistics companies, raw material suppliers and end-users, are interested in the IREPAS meetings. I am very pleased with how far IREPAS has come and SteelOrbis has made a tremendous contribution to this progress over the past 10 years. I would like to extend my gratitude especially to Murat Eryılmaz. IREPAS will continue to improve, and maybe we can reach a wider platform, adding other industries as well. As a Turkish rebar producer, what is your view of the US antidumping duty investigation? 52
UG: As you know, in today’s world, all countries are trying to eliminate protectionist barriers. We are trying to create a freer trade environment, but there is also an undeniable fact: the producers want to take measures to protect themselves in their own region. I think the antidumping duty investigations are the producers’ last resort. e US is experienced in this field and every time it seeks to put its experience to use. e dumping investigations might appear like a negative development, but, if you are experienced enough, you can turn a disadvantage into an advantage. Turkish producers have done this in the past. We have faced many antidumping investigations in several international markets and succeeded in all cases. erefore, I am not pessimistic about the US rebar investigation. Another reason for me to be optimistic is that the US is one of the most positive markets in the world and I am curious to see how the US will prove that there is injury. Even if they do and the investigation result is against Turkey, I do not think that this will have negative eﬀects in the long run. What do you think about the serious challenges long steel producers have been facing lately? UG: e long steel producers are not the only ones facing challenges, all producers are facing them. e biggest problem is that current demand levels are not satisfactory for the market and/or for producers given current capacity or production. at is to say, the problem is one of overcapacity. In some countries, certain producers can adjust their production according to demand; however, there are many others which are not able to do this for various reasons. is is causing problems in the market. To overcome this situation, first of all demand must improve, Volume 7; Issue 1
but this is not expected to happen in the short term. Maybe in a few years’ time, supply and demand will reach equilibrium, but for the time being I cannot say what will happen in terms of production. When you continue producing, you have to pay more for the raw material because of the demand you have created and you put pressure on the prices of the products you produce. In the end, the margin you worked for is gone. at is what concerns producers most.
Finally, apart from the problems you have mentioned, what are your short- and medium-term expectations for the market? UG: Lately, the outlook has been a bit more positive. Favorable market conditions are witnessed again in the US. Europe is slowly emerging from the euro crisis. I think the elections in Germany will have positive effects as well. e improvements in the US and Europe will also reflect positively on the rest of the world. Another expectation, or rather a hope, is that the markets will gain some relief from political troubles subsiding in the Middle East. However, all this will not happen in just one day, it will take time. I think we are almost certain that the current situation will last until the end of the year. 2014 will also be similar to the current year, but we are expecting some improvement SO starting from next year. \
Steel Trade Cases: The beat goes on, and on, and on
hen the US pipe industry filed a series of antidumping (AD) and countervailing duty (CVD) petitions in July 2013 against oil country tubular goods (OCTG) from nine countries, it seemed that the recent resurgence of trade cases had reached its zenith and that everyone—from domestic mills and foreign producers to international trading companies and US consumers—would take some time to absorb the impact of the investigations already in progress. After all, in the three months before the OCTG case was filed, four other types of steel products came under the scrutiny of the US Commerce Department (Commerce) and the US International Trade Commission (ITC). Together with the OCTG case, these proceedings covered almost $2 billion in imports from 13 diﬀerent countries in 2012. But during a three-week span in September 2013, other sectors of the domestic steel industry jumped on the AD and CVD bandwagon. First, long-rumored cases were filed against steel concrete reinforcing bar from
Mexico and Turkey. Together these countries accounted for imported rebar with a value of more than half a billion dollars in 2012. Significantly, the new filings came shortly after Commerce and the ITC determined in a five-year sunset review that the AD orders on rebar from Belarus, China, Indonesia, Latvia, Moldova, Poland, and Ukraine should be continued for a further five-year period. Except for trace levels of imports from Canada and very modest tons from the Dominican Republic, all foreign sources of rebar are subject to AD orders or ongoing AD and CVD investigations. Also in September, two US steel companies and the United Steelworkers Union filed AD and CVD petitions against grain-oriented electrical steel from China, the Czech Republic, Germany, Japan, Korea, Poland, and Russia. Imports from these countries totaled $84 million in 2012. And less than two weeks later, non-oriented electrical steel from China, Germany, Japan, Korea, Sweden, and Taiwan likewise became subject to AD and CVD proceedings. In 2012, imports of
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NOES from these countries were valued at more than $86 million. Adding further complexity to many of these pending AD and CVD investigations, the petitioning domestic industries have submitted allegations of “critical circumstances”. A final aﬃrmative determination of “critical circumstances” will result in the retroactive assessment of AD and CVD duties for a period of 90 days prior to the date of Commerce’s preliminary dumping or countervailing duty determination. It is important to note that both Commerce and the ITC must make aﬃrmative determinations of “critical circumstances” for duties to be assessed retroactively and that each agency applies a diﬀerent set of standards in making such determinations. In its “critical circumstances” analysis, Commerce must decide whether imports have increased by 15 percent or more. Generally, the reference date for this analysis is the filing date of the AD or CVD petition, and Commerce compares imports after the filing date with imports before the filing date. is was the approach of the petitioning industries in the “critical circumstances” allegations regarding steel threaded rod from ailand and rebar from Mexico. In the case of threaded rod from ailand, Commerce has already made a preliminary aﬃrmative determination of “critical circumstances” as well as calculating preliminary dumping margins of 68 to 75 percent. By contrast, in the investigations of
OCTG from India, Korea, Turkey, Ukraine, and Vietnam and rebar from Turkey, the US industry relied on another provision of Commerce’s critical circumstances regulations which uses a diﬀerent reference point—the date on which “importers, or exporters or producers, had reason to believe, at some time prior to the beginning of the proceeding, that a proceeding was likely.” For example, the domestic rebar producers claimed that, prior to the filing of their petition in September 2013, there was market speculation—demonstrated by comments in industry publications—about a trade case on rebar imports as early as May 2013 and that representatives of the Turkish steel industry, including rebar producers, came to the United States in June 2013 to meet with Commerce, Members of Congress, and port authorities “in an eﬀort to dissuade governmental authorities from entertaining and/or initiating a trade remedy” on rebar. erefore, the US rebar industry argues that the reference date for Commerce’s critical circumstances analysis should be May 2013 and not the filing date of September 2013. Commerce will likely announce its “critical circumstances” determination when it releases its preliminary dumping and countervailing duty determinations later this year. However, the story on critical circumstances is not finished until both Commerce and the ITC make their final determinations at the end of these investigations. In addition to alleging critical circumstances after the filing of the OCTG petition, the US industry also has alleged additional subsidies post-petition. In November, domestic OCTG producers submitted information about two more alleged subsidy programs involving Turkey and four more programs involving India. Despite these new allegations in the CVD investigations, Commerce made a negative preliminary determination that Turkish producers and exporters received only de minimis subsidies. e results for India were mixed—with Commerce finding that one of two mandatory respondents received subsidies and the other did not. Despite some expectations of further petitions being filed before the end of 2013, no new trade cases on steel were initiated in the final quarter of the year. But this might just be the calm before the New Year storm. ere are persistent rumors of new trade actions against wire rod, most likely targeting China. It also appears possible that new cases could involve downstream steel products, such as fabricated tubular and wire products. Based on the surge of cases in the latter part of 2013, the question may not be whether there will be more steel cases in 2014 but when SO \ will the next round begin.
Frederick P. Waite and Kimberly R. Young Vorys, Sater, Seymour and Pease LLP (Washington, DC)
Volume 7; Issue 1
By Randy DeFord, Engineering Manager, Mid-West Spring & Stamping Reprinted with permission from Wire Forming Technology International, Fall 2013
Compression springs in parallel Although it’s not a question I hear frequently, it is a question I’m asked at times. What happens when a force is applied to two identical compression springs? e answer is just as easy as it may seem—the combination can handle twice as much force. If two springs have a rate of 500#/ inch of travel, the combination now produces a system capable of 1000#/in. You can look at it two ways—the system will produce 1000# in the one inch travel, or the system will only need to travel half the distance to produce 500#. Either way, there is a doubling of potential. e same is true if more force is needed. If the force would need to quadruple, four springs will do the job. But what would be an application for multiple parts? If a device has a very short stroke, such as a weight scale, the device may need to create tremendous force with very little movement. A very high rate spring may not be possible because the wire size needed would be very large, well beyond the physical capacity of the device. Let’s say an application needed to produce 5000# in 0.100” travel. is would require a spring rate of 50,000#/in. e required spring would be gigantic. But, it may be possible to use 20 much smaller springs that create 2500#/in, standing side by side in a cluster. is would deliver the force in the short deflection. Also, the cost of the 20 springs may actually be less than the one large spring because the smaller parts can be produced on standard springmaking equipment with standard tooling—no special requirements for production. Another very common use of this method is the nested spring. is is a spring assembly with two or three springs housed inside one
another. Instead of both springs having the same spring rate, they have rates in percentile amounts to create the total rate required. For example, a spring system needs a total rate of 250#/in and cannot be achieved with just one spring. e standard approach with a two-spring nest is to design the largest spring to handle 65 percent of the rate, which would be 162.5#/in. en, a spring with an
O.D. that will fit inside the I.D. of the larger spring can be designed to produce a rate of 87.5#/in. e total rate is accomplished. is application is quite common in engine valve springs. e main reason for this is that valve springs must be designed with very low stresses WFTI for very long life. One spring cannot accomplish the force in the space allowed for the spring to operate. But a two or three-spring nest can do the job very well and do it with stresses low enough to produce, theoretically, infinite life. e lesson to understand is that any compression spring placed beside another, that will operate in tandem, will combine forces. If three compression springs with the same free length are placed beside each other with rates of 100, 200 and 300#/in, the total rate of the system will be 600#/in. If all the springs have been designed for low stresses, the cost of the high life system with multiple parts will be negligible compared to the payback in performance.
Volume 7; Issue 1
All things springs
Fabricators Corner Spring fundamentals One caveat with nested springs—each spring must be the opposite winding direction of the spring next to it. e illustration below shows that the large spring is a righthand coil direction, while the smaller, inner spring is left-hand wound. If nested springs are the same pitch direction, they can tangle and this would cause catastrophic failure of the mechanism. In most uses of compression springs, coil direction is only an issue in certain applications. But when springs operate one-inside-the-other, where one spring can possibly touch its mating spring, the opposite coil approach must be used.www.mwspring.com Wire Forming Technology International is a quarterly publication covering the manufacture of springs, wire formed parts, wire mesh and rebar products and the materials, tooling, machinery and control systems for making those parts. Industry professionals can subscribe for free at http://wireformingtech.com/subscribe.asp. Editorial can be submitted to Mike McNulty at email@example.com, and advertising information can be obtained from Tom Hutchinson at firstname.lastname@example.org. Sister publications are Fastener Technology International, www.fastenertech.com, and Wire & Cable Technology International, www.wiretech.com.
API’s circular connectors address strict safety requirements
API Technologies Corp., a leading provider of high performance RF/microwave, power, and security solutions for critical and high-reliability applications, announced January 8 that their EMI filtered and unfiltered circular connectors are now available to meet the standards for RTCA/DO-160 Section 22 Lightning Re-
Fabricator’sCorner API's circular connectors protect against lightning
quirements. RTCA/DO-160 Section 22 outlines environmental conditions and testing procedures for airborne equipment, particularly for protection against lightning, to provide increased safety, system capacity, and overall eﬃciency. API’s circular connectors feature a specially formulated potting compound and proprietary potting process to seal the filter elements. e potting insulates and protects the capacitive filter element and allows it to withstand very high voltage surges, such as those caused by lightning strikes. “API is proud to provide its customers with products that meet the tightest safety standards,” commented David Arthurs, Product Line Manager, API Technologies, Electromagnetic Integrated Solutions (EIS). “With the addition of RTCA/DO-160 lightning strike protection, our line of specialty EMI filtered and unfiltered circular connectors meet a wide variety of standards suitable for the aerospace, military and commercial industries.” Available in custom and value-added designs, API’s circular connectors can be specified to meet a variety of size, shape, filtering, or material requirements, including MILDTL-38999, MIL-DTL-26482, MIL-DTL55116, MIL-PRF-15733, and
MIL-DTL-83723. Value-added services include adding wires terminated or unterminated to all lines or only selected lines, twisted pairs, and labeling of wires for easy placement in a system. API designs and manufactures all components for its circular filtered and unfiltered connectors. From shells and shields to seals and grommets, each component of a custom connector undergoes an extensive assembly and testing process, delivering extremely reliable, high performance connectors to fit both economic and mechanical needs. API Technologies’ Electromagnetic Integrated Solutions (EIS) line of products includes EMI filters and interconnects, ceramic capacitors, specialty connectors and cabling, power filters and film modules, as well as a line of magnetics.
New online solution source for making pressure vessels HGG Profiling Equipment announced the launch of a specially focused online solution source for manufacturers and fabricators of pressure vessels. PressureVesselCutting.com addresses typical problems associated with manufacturing and fabricating pressure vessels, heat exchangers, and spooling; focusing on speVolume 7; Issue 1
cially targeted product and software solutions that reduce welding, grinding and cutting costs while improving cut quality for a perfect fit up. PressureVesselCutting.com features specially designed machinery for pressure vessel cutting, including the chuck-type Stationary Pipe Cutter (SPC-Series) with patented biaxial head for cutting large diameter pressure vessels, spools and nozzles, the PC-600 for cutting smaller pressure vessels and nozzles, and the SPC-RB with a roller-bed for high production pressure vessel, spool and pipe cutting. e website also features HGG software designed especially for improving pressure vessel cutting, including ProCam Software, a fully automated software connection to export cutting files directly from design/CAD programming centers. Further, the site allows visitors to submit technical drawings that detail pressure vessel specifics directly through the site, which in turn enables HGG specialists to provide time studies that document cost savings and expected machine payback. e site also provides a number of individual case histories that document how well known companies have dramatically reduced the time needed to prepare and cut pressure vessels while increasing pressure vessel cut quality. HGG, headquartered in Wieringerwerf, Netherlands, is a leading supplier of pipe cutting machines, robotic profile cutting lines and associated cutting equipment solutions around the world. HGG maintains subsidiaries in the Philippines, China, India, the MiddleEast, and most recently in the United States. e new HGG Profiling Equipment subsidiary in Charleston, South Carolina provides comprehensive sales and service support for the company’s growing customer base in North America, Central America and South America. is HGG subsidiary serves an array of industry customers in Steel Construction, Piping Process Industries, Oﬀshore/Onshore, Crane Building, Ship Building and othSO \ ers.
1. A man was finally charged in the murder of an employee of this now-defunct steel mill 6. is Mexican steel producer did not end up expanding operations in the US in 2013 7. One of the Mexican homebuilders that lost (collectively with other firms) US$4.6 billion in market value in Q2 2013 8. e comparison period for the US AD/CVD case against Turkish rebar will be from __through September 11. 3D metal printers might be able to print these, to the dismay of activists 13. Voters in this country rejected a proposal that would limit executive salaries 15. Steelmaker that suspended operations at its Delaware mill in October 16. Growth in Nigeria and this African country is expected to remain robust in 2014 17. e Dalian Commodity Exchange launched futures contracts for this product in October 18. e US is the third-largest steel producer in the world behind Japan and this country 21. Conservative media in the US hailed recent US job growth as this kind of success 23. Korean steelmaker that is spending US$300 million in investments in Mexico 24. A “ghostly face” allegedly appeared on this while in the Impact Steel exhibit 27. Chairman of the Turkish Steel Exporters Association (last name) 30. Collection of countries that have had their “wings clipped” according to Mr. Bull 31. ArcelorMittal plans to reopen its idled mill in this US state 32. is US auto company plans to replace some steel components with aluminum in its best-selling vehicle 34. US Steel bought its now-idled Hamilton mill from this Canadian steelmaker in
2007 36. Nickname for US region that includes Pennsylvania, West Virginia, Ohio, Indiana, parts of Michigan and central New York (two words) 37. is type of selling platform forced Chinese steel traders to adapt 38. e US pipe industry filed AD/CVD petitions against nine countries for this product 39. Acronym for Mexico’s National Chamber of Iron & Steel Industry 41. ArcelorMittal and NSSMC formed a joint venture to buy yssenKrupp’s mill in this US state 45. Italian steelmaker facing continuous diﬃculties 46. e sunken Costa Concordia cruise ship collided with a reef in this country 47. is area is known as the steel trading center of Shanghai 48. is essential steel end-use product, which helps fight fires, can fetch up to $300 at scrap yards
Down 2. Previous name of Southern California mini-mill that Gerdau acquired 3. is US state leads the country in steel-framed homes 4. New chairman of IREPAS (full name) 5. Rebar from this country has reportedly made it as far as the Midwest at cost competitive numbers 9. President of Assofermet (last name) 10. Argentina plans to invest US$3.5 million in this sector in 2014 11. is EU-member country could face another crisis as soon as March 2014 12. e US imported 9,127 metric tons of rebar from this country in November 14. According to Frank Bergren, wire rod is more tied to this type of consumption 19. Name of Spanish firm that was contracted to expand the Panama Canal 20. CEO of Deacero (last name) 22. ArcelorMittal plans to invest $100 million in a new rolling mill in this South American country 24. A Philadelphia man stole and drove this from the scene of the crime to sell for scrap 25. Caveat of this type of metal springs is that each spring must be the opposite winding direction of the one next to it 26. Fictional character that swims in a silo full of money (full name) 28. Turkey’s top producer of steel slab 29. Increased rebar imports from Asia could mean increased US scrap exports from this region (two words) 33. Midwestern Steel Fabricators was destroyed by this in December 35. Major European recycler 40. Anglo American completed the sale of this iron ore operation in November 42. Country that surprisingly exported nearly a million tons of rebar in 2013 43. Interpipe began exporting this steel product in October 44. New Jersey will erect a steel wall in one of its towns hardest hit by this hurricane Answers on page 63
Volume 7; Issue 1
SteelOrbis Shanghai speaks with Leon Li, Research Director at STEELEASE, about new developments in the Chinese steel market that will have the most influence in 2014.
In 2013, with tightening monetary policy, Chinese domestic banks stopped credit for the steel industry. Currently, the volume of steel traders has seen a significant drop. What’s your view on prospect for the future of steel trading in China? LL: From 2012 to 2013, many traders dropped out of the steel trading market, with many even running away from their bank loans. Currently, most banks in China are very cautious about lending money to steel traders. e Dabaishu area, previously known as the steel trading center of Shanghai—comprised of nearly 5,000 steel trading companies, with transaction volume over 500 billion mt per year—is now filled with empty buildings. In 2012, 90 percent of steel traders in China saw losses, with 6-7 percent maintaining the break-even point, and only 2-3 percent making profits. Market insiders said there were more than 200,000 steel traders in China as steel industry has experienced rapid growth over the past 10 years. However, most steel traders did not have core competitiveness in the market, mainly playing the role of a middleman, buying from steel mills at lower prices and selling to end-users at a higher level. With the rising ecommerce platforms in the steel industry, prices became transparent, and their old way of making money could not last much longer. Some steel traders, who participated in developing new products and processing with steel mills and understood end-users’ demand, survive and live better than others. Some even take part in the raw materials field, to enlarge their business scope and engage in international trade of quality steel. Under the hard times of Chinese steel market, bearing the burden of oversupply, market insiders say only those steel traders upgrading their business model could move forward. In the short term, steel trading will be
back to normal, indicating that trading itself instead of financing is the more reasonable activity in steel industry. Inventories of some steel traders will be sold to compensate financing, while traders will do their business in a normal way again. However, in the long term, steel trading will finally involve safe financing, instead of high-risk financing.
In mid-October, Dalian Commodity Exchange (DCE), one of the four futures exchanges in mainland China, launched trading of iron ore futures, which is the first iron ore futures offering based on physical delivery system. Market insiders think China will move a giant step forward in gaining pricing power in the global iron ore market. How do you think these iron ore futures will impact the Chinese steel market? LL: is iron ore futures launch has definitely exerted a certain impact on the original iron ore pricing system, but it’s too early to say that China will gain pricing power in the iron ore market. As a vital raw material in steelmaking, the iron ore market has several features. First of all, the supply is highly concentrated, with three giant miners controlling 70 percent of seaborne iron ore around the world. Secondly, the demand is of low concentration; China has the largest demand for iron ore, but there are too many steelmakers in China, lowering its power in the pricing system. Originally, buyers and sellers in the global iron ore market will negotiate iron ore prices annually, which would ensure the long-term supply and avoid high risks of price volatility. However, a severe economic crisis hit the world in 2008, dragging down this annual price negotiation between buyers and sellers in iron ore market. For those expecting high prices on iron ore futures to provide a new opportunity for Chinese buyers to gain pricing power, they will get declined. Actually, DCE’s iron ore Volume 7; Issue 1
futures is more like providing a platform for market participants, including miners, steelmakers, traders and financing institution, to trade iron ore of financial attributes. Unlike the independent pricing system of rebar futures in the Chinese market, iron ore giants still hold the pricing power throughout the world. But the futures system oﬀers Chinese market players an opportunity to lock in profit and lower risks in the iron ore market, and gain interest arbitrage between rebar futures.
According to your extensive experiences in steel industry, what do you think are key elements that will influence the Chinese steel market in the future? LL: e Chinese steel industry is a highly market-oriented industry, indicating supply and demand are vital factors exerting impact on this industry. In China, oversupply will be a long-term situation for steel industry, which indicates demand will be more important for the steel sector. As for demand, there are many elements having influences on it, for instance, China’s economic growth, the central government’s policy and international environment, etc. For the domestic market, the central government’s policy will play a key role in stimulating steel demand. Taking post-2008 as an example, when facing the large-scale economic recession during that period, China’s RMB 4 trillion stimulus policy even caused investment boom for infrastructure construction, bolstering the steel industry significantly. However, it is expected that China will take actions in structuring adjustment in the following years to treat overheated investment-oriented economic development, suggesting the steel sector might be negatively aﬀected. SO \
week 45 week 46 week 47 week 48 week 49 week 50 week 51 week 52
12-25 mm 8-12 mm CIS Turkey Export FOB Black Export FOB Sea (USD/mt) (USD/mt)
week 45 week 46 week 47 week 48 week 49 week 50 week 51 week 52
Min. Max. 590 600 590 600 590 595 590 600 590 600 580 590 585 595 585 595
Average 575 575 570 572 572 575 580 575
Hot Rolled Coils
(2 mm) Russia Export FOB (USD/mt)
(2 mm) Ukraine Export FOB (USD/mt)
week 45 week 46 week 47 week 48 week 49 week 50 week 51 week 52
Min. 535 545 545 545 570 565 565 565
Min. 510 530 530 530 540 530 530 530
Max. 545 550 550 550 585 575 575 575
Crossword Answers: Across 1. BETHLEHEM 6. DEACERO 7. HOMEX 8. MAY
Min. 694 694 694 694 694 694 694 694
11. GUNS 13. SWITZERLAND 15. EVRAZ 16. ANGOLA 17. IRON ORE 18. CHINA 21. UNAMBIGUOUS 23. POSCO 24. BEAM
Average 520 530 530 535 535 535 530 530
Max. 716 716 716 716 716 716 716 716
USA domestic mill prices (USD/mt) Min. 728 728 728 728 728 728 728 728
27. EKINCI 30. BRIC 31. TENNESSEE 32. FORD 34. STELCO 36. RUST BELT 37. ECOMMERCE 38. OCTG 39. CANACERO
ST 37 CIS Export FOB Black Sea (USD/mt) Min. Max. 510 520 510 520 500 510 505 510 505 515 510 515 505 510 505 510
week 45 week 46 week 47 week 48 week 49 week 50 week 51 week 52
Base Sizes USA Domestic mill price (USD/mt)
(3-12 mm) China Export FOB (USD/mt)
Max. 515 535 535 535 545 535 535 535
A3 CIS Export FOB Black Sea (USD/mt) Min. Max. 362 372 352 362 352 362 362 367 362 367 367 372 367 377 367 377
Max. 750 750 750 750 750 750 750 750
week 45 week 46 week 47 week 48 week 49 week 50 week 51 week 52
ST 37 Turkey Export FOB (USD/mt) Min. 510 510 500 505 505 510 505 505
Chinese USA import USA Low carbon Turkish Export DDP Domestic FOB Loaded mill price (USD/mt) Truck USG (USD/mt) (USD/mt) Min. Max. Min. Max. Min. Max. 628 650 705 728 600 605 628 650 705 728 600 605 628 650 705 728 580 585 628 650 711 734 595 600 628 650 717 739 590 595 628 650 717 739 590 595 628 650 728 750 590 595 628 650 728 750 585 595
Cold Rolled Coils
(0.5 mm) Russia Export FOB (USD/mt)
(0.50 mm) Ukraine Export FOB (USD/mt)
week 45 week 46 week 47 week 48 week 49 week 50 week 51 week 52
Min. 620 670 670 670 690 680 680 680
Min. 610 620 620 620 620 620 620 620
41. ALABAMA 45. ILVA 46. ITALY 47. DABAISHU 48. HYDRANT
Down: 2. TAMCO
Volume 7; Issue 1
Max. 520 520 510 510 515 515 510 510
Q235 China Local (RMB) including 17% VAT Average 3095 3095 3075 3075 3078 3078 3090 3083
HMS I/II 80:20 HMS I/II 60:40 USA Europe Export FOB East Export FOB Coast (USD/mt) (USD/mt) Min. Max. Min. Max. 355 355 335 340 345 355 330 335 345 355 330 335 345 355 330 335 355 360 340 345 360 365 340 345 360 365 340 345 360 365 340 345
Max. 630 685 685 685 695 685 685 685
3. HAWAII 4. KIM MARTI 5. JAPAN 9. PEZZOTTI 10. MINING 11. GREECE 12. SPAIN 14. CONSUMER 19. SACYR
Max. 620 625 625 625 625 625 625 625
(1.0 mm) China Export FOB (USD/mt)
USA domestic mill prices (USD/mt)
Average 610 630 630 635 635 635 630 630
20. GUTIERREZ 22. ARGENTINA 24. BACKHOE 25. NESTED 26. SCROOGE MCDUCK 28. ISDEMIR 29. WEST COAST 33. FIRE
Min. 838 838 838 838 838 838 838 838
35. ECORE 40. AMAPA 42. LATVIA 43. BILLET 44. SANDY
Max. 860 860 860 860 860 860 860 860
n late November, voters in Switzerland rejected a proposal that would have limited the salaries of top executives to a 1:12 ratio to their lowest paid employees. While the proposal was a grassroots eﬀort, garnering at least the 100,000 signatures required to put it on the ballot, over 65 percent of voters rejected the notion that wealth should be reined in. Certainly, Occupy Wall Street-types shook their head in dejection, while American executives rejoiced for their Swiss brethren, confident that such a proposal would never make it past the Internet outrage stage in the US. But they shouldn’t be so quick to smirk. At first glance, the Swiss proposal looks like the dreaded income redistribution at its worst, funneling hard-earned wealth from those who created it down to those who, well, also helped create it. at’s something that execs fail to remember when donning the “job creator” crown: the economy is not a monarchy, with the ruling class lording over the peasants. It’s an ecosystem, in which every part—from the lowly janitor up to the business-whiz CEO—serves an essential function. So why has the income of the top 1 percent in the US grown by 31.4 percent between 2009 and 2012, while everyone else’s income only grew 0.4 percent? Because the top 1 percent are hoarders. Instead of hoarding knick-knacks and newspapers and cats like those poor souls on television, the rich hoard their money. In a way, it makes sense: when you already have five houses, ten cars, a yacht and a private island, it’s rather impossible to spend everything you make. So as corporations increase profits, the recipients of shareholder dividends and fluﬀed portfolios just shunt the cash into investment accounts or oﬀshore holdings or a giant silo to swim in like Scrooge McDuck. Of course, many in the top percentile of US earners argue that inequality is necessary—after all, how can people strive for greatness if they’re not mired in poverty? is is true, to some degree. Ambition and opportunity are pillars of the US’ economic supremacy—but there’s a diﬀerence between some inequality and too much. Some is
good. But tales of the consequences of too much have left a bloody stain on the history of human civilization. So where is the balance? How can US companies uphold their freedom of prosperity while ensuring the furious masses don’t revolt? e secret is that it doesn’t have to be a choice between the two. Companies can thrive while also providing their employees with attractive wages and benefits, as long as they understand that the two goals are not direct corollaries. Paying employees more will not automatically increase profits, of course—but in the grand scheme of the economic ecosystem, it will. To put it simply, who is buying the products and demanding the services of major US corporations? By number and value, mostly the middle and lower classes for the obvious fact that they account for most of the population, and also because they tend to spend money when they have it. Sure, many people have savings accounts, but come on—the entire advertising industry is built upon the ravenous consumerism that makes American culture unique. Give the lower and middle classes more money, and they will spend it. When they spend it, that creates demand, which increases production (and employment), resulting in bountiful quarterly reports. e CEOs are happy, the shareholders are happy, the employees/consumers are happy. Bloody revolution is averted. To make the idea more palatable, don’t think of it as redistributing wealth—think of it as recycling. As wealth moves through this cycle, everyone wins: jobs are created and thus entitlement spending declines, which in turn allows more funds for education to prepare the next generation of workers/consumers to participate in the ecosystem. And really, investing in wealth recycling won’t make as much of a dent in a company’s ledger as many might think. Take Nucor for example—while there isn’t too much definitive information out there (and calls to the company were not returned), it appears the average non-management position makes about $50,000 annually. Now think about how much of an impact a 10 percent raise
($5,000/year) would make on that average worker: on a monthly basis, the extra $415 could mean a payment on a new car, or multiple dinners out, or movies at the theater every week, or a weekend trip, or new clothes, or paying down existing debt to allow for disposable income in the future. And all these purchases have instant reverberations in the economy—there’s no such thing as “trickle-down”, just “trickle-around”. Considering that Nucor has about 20,000 employees, and many business analyst sources estimate the industrial corporation manager-to-employee ratio to be around 1:10, that means a 10 percent raise for the 18,000 or so non-management employees at Nucor would cost the company about $90 million per year. While that sounds like a lot, the company made $147.6 million in profits during the third quarter of 2013 alone, and its current cash liquidity sits at $1.77 billion. Yes, billion—if anyone else had 1.77 billion of anything squirreled away, it would be considered hoarding at its most extreme. So to Nucor, AK Steel and Gerdau, plus all the other steel mills and distributors and fabricators and end-users—heck, all the major corporations in the US, from WalMart to Coca-Cola to Apple: why not try it, as a socio-economic experiment of sorts? See what happens in the local economy. See what happens in the macro-economy. I bet you’ll be surprised—but I won’t. SO \
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What Is SteelOrbis? SteelOrbis is the only gathering point for the worldwide steel industry. SteelOrbis is a unique e-marketplace and mark...
Published on Jan 30, 2014
What Is SteelOrbis? SteelOrbis is the only gathering point for the worldwide steel industry. SteelOrbis is a unique e-marketplace and mark...