CRU Conference Day Two: The North American Steel Markets in 2013 and Beyond
11/13/2013 - CRU’s North American Steel 2013 Conference continued on 12 November 2013 and featured talks on currency, the energy markets and their potential for the U.S. market, and outlooks for the scrap and long products markets.
The day started with a presentation on currencies. George T. Dowd III, senior director at Newedge USA LLC, provided both macro and micro views of the current state of the foreign exchange markets and how they relate to the steel and metals industries.
Continuing the sessions from the previous day, session six focused on Energy: Separating Fact from Fiction. Steve Mehltretter, partner and leader of the Americas Metals and Mining Practice of A.T. Kearney, spoke on the implications of exporting liquid natural gas (LNG) and what the natural gas renaissance means for the steel industry. The biggest advantage for the steel industry will be on the sell side, he said. Drilling for gas and oil will continue to increase, so then will sales of OCTG and line pipe. Steel will also benefit as it is used in the building of facilities for power generation, chemical and LNG facilities, and midstream infrastructure, he pointed out. In order to capture the full potential of natural gas, however, certain challenges must be addressed: the aging of manufacturing assets, lower infrastructure spending, and a scarcity of human talent and capital, he said.
Alex Laugharne, senior consultant — strategies at CRU, addressed the economics of direct reduced iron (DRI). He discussed how, historically, the viability of DRI production in the U.S. has been closely linked to domestic gas prices, and how the current lower gas prices have been re-incentivizing DRI production. This makes sense, he said, as long as gas prices stay low and the DRI is only competing as a premium product for high-quality steel production. Backward integration into pellet production could improve DRI economics, he said, but a pellet plant would need to be of suitable scale and ideally have access to low-cost pellet feed. Although the U.S. currently has no supply of DRI-grade pellets, this could change quickly as demand grows. Essar Steel Minnesota’s pellet project has the potential to produce some DR grade pellets, he noted.
Martin Flash, senior associate and managing director of Mega Associates Ltd., discussed to what extent the energy revolution will revitalize the steel market, both through direct consumption and via the positive effect of cheaper energy on the manufacturing base in general. The changing energy landscape will be nothing but good for the steel industry, he said, as more reshoring occurs, demand increases for OCTG and line pipe, and automotive and construction steels should benefit as well.
Moving on to raw materials, David Hodory, director, marketing and communications for the David J. Joseph Co., gave an overview of the current scrap market and the outlook for the future. The macro trend related to raw materials and developing nations has been in play for some time, he said, as raw materials are imported into developing nations, especially those that don’t have a domestic supply to meet demand levels. These countries will continue to consume, and he sees China as a net scrap importer for the foreseeable future. The U.S. and Western Europe will continue to be net scrap exporters through 2020, he predicted.
In the long products market, the pace of the ongoing recovery will continue to be sluggish, said Elizabeth Johnson, senior consultant at CRU. At the same time, there will be a continued shift of focus from commodity-grade material to higher-grade products, she said. Trade cases should help to protect U.S. interests, and U.S. producers will be able to maintain competitiveness in a global market, she predicted.
Gary J. Fehr, an independent consultant, finished off the conference with a talk on how companies can create value through their purchasing departments. He provided insight on purchase price strategies, negotiating value enhancers, and the importance of a strategic supplier selection process.
In addition to the array of topics covered during the two-day event, conference delegates benefited from a number of networking opportunities, including coffee breaks and a cocktail reception. Presenters seemed to be in agreement that the natural gas revolution will be an overall benefit for the steel industry and that markets should continue to recover over the next few years. CRU is planning its next North American Steel Conference again at the Westin River North in Chicago for 10–12 November 2014. For more information, visit www.nasteelconference.com.
Continuing the sessions from the previous day, session six focused on Energy: Separating Fact from Fiction. Steve Mehltretter, partner and leader of the Americas Metals and Mining Practice of A.T. Kearney, spoke on the implications of exporting liquid natural gas (LNG) and what the natural gas renaissance means for the steel industry. The biggest advantage for the steel industry will be on the sell side, he said. Drilling for gas and oil will continue to increase, so then will sales of OCTG and line pipe. Steel will also benefit as it is used in the building of facilities for power generation, chemical and LNG facilities, and midstream infrastructure, he pointed out. In order to capture the full potential of natural gas, however, certain challenges must be addressed: the aging of manufacturing assets, lower infrastructure spending, and a scarcity of human talent and capital, he said.
Alex Laugharne, senior consultant — strategies at CRU, addressed the economics of direct reduced iron (DRI). He discussed how, historically, the viability of DRI production in the U.S. has been closely linked to domestic gas prices, and how the current lower gas prices have been re-incentivizing DRI production. This makes sense, he said, as long as gas prices stay low and the DRI is only competing as a premium product for high-quality steel production. Backward integration into pellet production could improve DRI economics, he said, but a pellet plant would need to be of suitable scale and ideally have access to low-cost pellet feed. Although the U.S. currently has no supply of DRI-grade pellets, this could change quickly as demand grows. Essar Steel Minnesota’s pellet project has the potential to produce some DR grade pellets, he noted.
Martin Flash, senior associate and managing director of Mega Associates Ltd., discussed to what extent the energy revolution will revitalize the steel market, both through direct consumption and via the positive effect of cheaper energy on the manufacturing base in general. The changing energy landscape will be nothing but good for the steel industry, he said, as more reshoring occurs, demand increases for OCTG and line pipe, and automotive and construction steels should benefit as well.
Moving on to raw materials, David Hodory, director, marketing and communications for the David J. Joseph Co., gave an overview of the current scrap market and the outlook for the future. The macro trend related to raw materials and developing nations has been in play for some time, he said, as raw materials are imported into developing nations, especially those that don’t have a domestic supply to meet demand levels. These countries will continue to consume, and he sees China as a net scrap importer for the foreseeable future. The U.S. and Western Europe will continue to be net scrap exporters through 2020, he predicted.
In the long products market, the pace of the ongoing recovery will continue to be sluggish, said Elizabeth Johnson, senior consultant at CRU. At the same time, there will be a continued shift of focus from commodity-grade material to higher-grade products, she said. Trade cases should help to protect U.S. interests, and U.S. producers will be able to maintain competitiveness in a global market, she predicted.
Gary J. Fehr, an independent consultant, finished off the conference with a talk on how companies can create value through their purchasing departments. He provided insight on purchase price strategies, negotiating value enhancers, and the importance of a strategic supplier selection process.
In addition to the array of topics covered during the two-day event, conference delegates benefited from a number of networking opportunities, including coffee breaks and a cocktail reception. Presenters seemed to be in agreement that the natural gas revolution will be an overall benefit for the steel industry and that markets should continue to recover over the next few years. CRU is planning its next North American Steel Conference again at the Westin River North in Chicago for 10–12 November 2014. For more information, visit www.nasteelconference.com.
