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SMU Steel Summit 2014 Explores State of Steel Markets
09/16/2014 - Imports and exports. Non-residential construction and housing starts. GDP and geopolitics. Global steel and raw materials pricing, risk and forecasts. All of this and much more was discussed in depth during Steel Market Update’s fourth annual Steel Summit in Atlanta, Ga., USA, on 3–4 September 2014. This was the first two-day conference for the Steel Summit, and nearly 200 people attended.
Day 1: China and the Global Economy
An optional morning workshop on lightweighting vehicles with steel kicked off the first day of the conference. Once all the attendees were in-house, John Packard, publisher of Steel Market Update, introduced the focus of the conference and spoke of the generally optimistic sentiment among steel buyers — the highest since 2008, just prior to the Great Recession.
Peter Wright, of Steel Market Analysis Inc., explained that the trends in both construction and manufacturing are positive and have been for quite a while. “Although the state of the market in 2010 was ‘lousy,’” he said, “the trends were still moving in the right direction.” In fact, the trends for construction remain positive, but they are still holding back steel demand below pre-recession levels.
The next presentations focused on the global marketplace. Chris Kuehl, of Armada Corporate Intelligence, spoke about the effect of geopolitics and other concerns, like the ongoing conflict in the Middle East, that make the business community nervous. Although the U.S. GDP is the largest in the world, its growth rate, typically around 2.5%, is not fast enough to fix the problems with the global economy. The fastest growing sector in the U.S. economy is healthcare, with the service and retail sectors following. These are not steel-intensive areas, and big-ticket purchases that do consume steel are not driving steel consumption. Rail is the only area showing growth, because the demand for railcars and oil tankers is high.
Imports are also a concern in the global economy, said Paul Lowrey, managing director of Steel Research. While the import share by world region hasn't changed much between 2000 and 2013, the U.S. is still the largest steel importing country in the world, while China is the largest exporter in the world. Roger Schagrin and Lew Leibowitz gave differing points of view on world overcapacity, imports, and trade cases involving anti-dumping and countervailing duty laws.
A keynote address was given during lunch by Saikat Dey, CEO of Severstal North America. Dey covered the guiding principles that were used at Severstal over the last two years to create value in the company. “Commercial activity is the key,” he said. “The buyer and seller are where real value is created, not in operations.”
The first day of the conference concluded with presentations on China’s influence on the steel industry, and price indexes/methodologies. Becky Hites, president of Steel-Insights Inc., noted that the Chinese steel industry last made money in 2011, but a long-term fix is in the works. Meanwhile, the growth of the Chinese steel market has been slowing. Andre Marshall, CEO of Crunch Risk, stated, “Contained growth in a repressed market is reasonable.”
A networking reception followed for all attendees.
Day 2: Logistics and Market Segments
A keynote address by John Ferriola, CEO of Nucor Corp., opened the second day of the Steel Summit 2014. He spoke of the challenges in the steel industry since the recession: the influx of imports, the changing landscape of raw materials, the need for innovation and new products, and recruiting the next generation of steelworkers. “Great challenges present great opportunities to great companies,” said Ferriola. “The opportunities are out there for companies willing to go after them.”
A session titled “Logistics: Will We Be Able to Get Anything Moved in 2015?” covered the current obstacles faced by the trucking, railroad and marine transport industries.
According to the American Transportation Research Institute (ATRI), trucks carry 70% of freight in the United States, and tonnage will increase for the trucking industry by about 30% by 2024. One of the top issues for the industry is driver shortage. It is estimated that demand for drivers will reach a shortfall of 239,000 by 2020! Also, according to ATRI, the cost of congestion in 2013 reached US$9.2 billion and 141 million lost hours of productivity. Rebecca Brewster, president and COO of ATRI, claimed that if Congress would fix 12% of the congested areas, 89% of the costs would be saved on interstate mileage.
Automotive and energy are the two main drivers keeping the rail industry afloat, according to Pat Ottensmeyer, executive vice president of Kansas City Southern, the seventh-largest Class I railroad in North America. Although steel production in the U.S. is still not at pre-recession levels, he said, metals account for about 11% of the company’s revenue and is growing faster than any other segment. A huge obstacle to moving steel by railcar is that the fleet has shrunk by 18–20%, and new orders for railcars might not be delivered until 2016!
Brendan O’Conner, vice president of marketing and marine transport for Interlake Steamship Co., described the challenges faced in moving materials on the Great Lakes during the winter of 2013–2014. The Great Lakes sees an average of 20 million tons of product moved each year, and the Great Lakes Basin is home to 50% of the U.S. steelmaking capacity. Forty separate cargoes were cancelled because of weather this past year. Nearly the entire Great Lakes were covered by ice, whereas they are covered 30–40% in a typical winter. The only upside was the increased water levels, which in turn increased the tons per inch loaded on the ships.
Midday presentations during the conference included “Ferrous Scrap Pricing” by Mike Marley of MetalPrices.com, and a discussion on “Commodity and Steel Forecasts and the Impact of Consolidation” between Timna Tanners and John Anton. Of course China played a huge part in the discussion, as Mr. Anton remarked, “The key to the steel outlook is overproduction.”
The final session of the Steel Summit, “Market Segments From a Steel Perspective,” focused on the energy, automotive and construction markets. “Energy-related demand is a crucial part of the U.S. growth story,” said Tim Stevenson of Cargill. “It is important to have a cohesive and well thought-out energy policy.” In the automotive segment, both light vehicle demand and jobs are growing, according to George Magliano of IHS Automotive. Recent data showed that light vehicle sales are now expected to reach 17.3 million units, the strongest sales pace since 2006. Meanwhile, the construction market still lags. John Cross of the American Institute of Steel Construction explained that the 62% drop in construction over the past 10 years is similar to the 70% drop during the Great Depression. The growth we have seen is good, but overall construction levels are still down 57% from their peak. Three of the key challenges, said Cross, are competition from foreign markets, wood and concrete.
The closing statements from John Packard included an announcement that the next SMU Steel Summit will take place 1–2 September 2015 in Atlanta, Ga.
Steel Market Update offers a variety of newsletters and workshops to keep you up-to-date on the trends in the steel industry. For more information, visit www.SteelMarketUpdate.com.
Article written by Karen Hickey, AIST publications managing editor.
An optional morning workshop on lightweighting vehicles with steel kicked off the first day of the conference. Once all the attendees were in-house, John Packard, publisher of Steel Market Update, introduced the focus of the conference and spoke of the generally optimistic sentiment among steel buyers — the highest since 2008, just prior to the Great Recession.
Peter Wright, of Steel Market Analysis Inc., explained that the trends in both construction and manufacturing are positive and have been for quite a while. “Although the state of the market in 2010 was ‘lousy,’” he said, “the trends were still moving in the right direction.” In fact, the trends for construction remain positive, but they are still holding back steel demand below pre-recession levels.
The next presentations focused on the global marketplace. Chris Kuehl, of Armada Corporate Intelligence, spoke about the effect of geopolitics and other concerns, like the ongoing conflict in the Middle East, that make the business community nervous. Although the U.S. GDP is the largest in the world, its growth rate, typically around 2.5%, is not fast enough to fix the problems with the global economy. The fastest growing sector in the U.S. economy is healthcare, with the service and retail sectors following. These are not steel-intensive areas, and big-ticket purchases that do consume steel are not driving steel consumption. Rail is the only area showing growth, because the demand for railcars and oil tankers is high.
Imports are also a concern in the global economy, said Paul Lowrey, managing director of Steel Research. While the import share by world region hasn't changed much between 2000 and 2013, the U.S. is still the largest steel importing country in the world, while China is the largest exporter in the world. Roger Schagrin and Lew Leibowitz gave differing points of view on world overcapacity, imports, and trade cases involving anti-dumping and countervailing duty laws.
A keynote address was given during lunch by Saikat Dey, CEO of Severstal North America. Dey covered the guiding principles that were used at Severstal over the last two years to create value in the company. “Commercial activity is the key,” he said. “The buyer and seller are where real value is created, not in operations.”
The first day of the conference concluded with presentations on China’s influence on the steel industry, and price indexes/methodologies. Becky Hites, president of Steel-Insights Inc., noted that the Chinese steel industry last made money in 2011, but a long-term fix is in the works. Meanwhile, the growth of the Chinese steel market has been slowing. Andre Marshall, CEO of Crunch Risk, stated, “Contained growth in a repressed market is reasonable.”
A networking reception followed for all attendees.
Day 2: Logistics and Market Segments
A keynote address by John Ferriola, CEO of Nucor Corp., opened the second day of the Steel Summit 2014. He spoke of the challenges in the steel industry since the recession: the influx of imports, the changing landscape of raw materials, the need for innovation and new products, and recruiting the next generation of steelworkers. “Great challenges present great opportunities to great companies,” said Ferriola. “The opportunities are out there for companies willing to go after them.”
A session titled “Logistics: Will We Be Able to Get Anything Moved in 2015?” covered the current obstacles faced by the trucking, railroad and marine transport industries.
According to the American Transportation Research Institute (ATRI), trucks carry 70% of freight in the United States, and tonnage will increase for the trucking industry by about 30% by 2024. One of the top issues for the industry is driver shortage. It is estimated that demand for drivers will reach a shortfall of 239,000 by 2020! Also, according to ATRI, the cost of congestion in 2013 reached US$9.2 billion and 141 million lost hours of productivity. Rebecca Brewster, president and COO of ATRI, claimed that if Congress would fix 12% of the congested areas, 89% of the costs would be saved on interstate mileage.
Automotive and energy are the two main drivers keeping the rail industry afloat, according to Pat Ottensmeyer, executive vice president of Kansas City Southern, the seventh-largest Class I railroad in North America. Although steel production in the U.S. is still not at pre-recession levels, he said, metals account for about 11% of the company’s revenue and is growing faster than any other segment. A huge obstacle to moving steel by railcar is that the fleet has shrunk by 18–20%, and new orders for railcars might not be delivered until 2016!
Brendan O’Conner, vice president of marketing and marine transport for Interlake Steamship Co., described the challenges faced in moving materials on the Great Lakes during the winter of 2013–2014. The Great Lakes sees an average of 20 million tons of product moved each year, and the Great Lakes Basin is home to 50% of the U.S. steelmaking capacity. Forty separate cargoes were cancelled because of weather this past year. Nearly the entire Great Lakes were covered by ice, whereas they are covered 30–40% in a typical winter. The only upside was the increased water levels, which in turn increased the tons per inch loaded on the ships.
Midday presentations during the conference included “Ferrous Scrap Pricing” by Mike Marley of MetalPrices.com, and a discussion on “Commodity and Steel Forecasts and the Impact of Consolidation” between Timna Tanners and John Anton. Of course China played a huge part in the discussion, as Mr. Anton remarked, “The key to the steel outlook is overproduction.”
The final session of the Steel Summit, “Market Segments From a Steel Perspective,” focused on the energy, automotive and construction markets. “Energy-related demand is a crucial part of the U.S. growth story,” said Tim Stevenson of Cargill. “It is important to have a cohesive and well thought-out energy policy.” In the automotive segment, both light vehicle demand and jobs are growing, according to George Magliano of IHS Automotive. Recent data showed that light vehicle sales are now expected to reach 17.3 million units, the strongest sales pace since 2006. Meanwhile, the construction market still lags. John Cross of the American Institute of Steel Construction explained that the 62% drop in construction over the past 10 years is similar to the 70% drop during the Great Depression. The growth we have seen is good, but overall construction levels are still down 57% from their peak. Three of the key challenges, said Cross, are competition from foreign markets, wood and concrete.
The closing statements from John Packard included an announcement that the next SMU Steel Summit will take place 1–2 September 2015 in Atlanta, Ga.
Steel Market Update offers a variety of newsletters and workshops to keep you up-to-date on the trends in the steel industry. For more information, visit www.SteelMarketUpdate.com.
Article written by Karen Hickey, AIST publications managing editor.
