Transcript Document

National Slag Association
89th Spring Meeting
Clearwater, FL
Steel – 2005/2006
Thomas A. Danjczek, President
Steel Manufacturers Association
March 20, 2006
NSA – Spring Meeting
I.
SMA
II.
2005
Steel – 2005/2006
• World Steel Production/Operating Rate
• China
• Scrap, Ore, Steel, Gas Prices
• Consolidations
III. 2006
• China’s Challenges
• Trade
• Energy & Environment
• Other
IV.
Slag Issues
V.
Conclusion
NSA – Spring Meeting
•The Steel Manufacturers Association (SMA)
–39 North American Companies:
33 U.S., 3 Canadian, and 3 Mexican
–109 Associate Members:
Suppliers of goods and services to the steel industry
•SMA member companies
–Operate 120 Steel plants in North America
–Employ about 40,000 people
–Minimill Electric Arc Furnace (EAF) producers
–Produce nearly 100% of structural, wire rod, rebar, minimill
plate and hot rolled, and a high percentage of SBQ products
–Also represent several integrated steel producers and
rerollers
NSA – Spring Meeting
•Production capability
–SMA represents over two-thirds of U.S. steel production
(app. 70%)
•Recycling
–SMA members are the largest recyclers in the U.S.
–Last year, the U.S. recycled over 70 million tons of ferrous
scrap
•Growth of SMA members
–Efficiency and quality due to low cost
–Flexible organizations
–EAF growth surpassed 53% in 2004, and anticipated to be
60% by 2010
2005
WORLD CRUDE STEEL OPERATING RATE
Operating rates recovered from 76 percent in 2000, to a peak of
87 percent in 2004, and have moved moderately downward since
late 2004.
90%
World Crude Steel
Operating Rate %
85%
80%
75%
2000
Cap Util % 76.1%
Source: Metal Strategies
2001
2002
2003
2004
2005
2006
2007
77.2%
80.3%
84.2%
86.8%
85.3%
85.0%
84.1%
NSA – Spring Meeting
China’s Impact
After 4 Trips in a Year…
Key Questions:
- When will Chinese steel production significantly exceed its
own domestic consumption – i.e. 50/60 MMT?
- Will the Chinese government shut down inefficient, excess
capacity? (Has not done so with polluting facilities despite
strong policy)
- How can North American Steel Industry compete against
Chinese government - - - IT CAN’T!
Chart 2: The Exploding Trade Deficit With China
Chart 3: China’s Foreign Exchange Reserves
CONCERNS
Steel Item
•North American steel industry CANNOT
compete against Chinese steel companies
financed and controlled by their
government
• In 2005, compared to 2004, China steel
imports are projected to drop by 6.1
million tons, while exports are projected
to increase by 12.3 million tons
• North American steel industry loss of a
significant increment of its customer
base to relocation to Chinese
production sites
Comment
Currency, banks, land, environment,
consolidations, policies
Trend worsens in 2006 with new
capacity on line, and China’s
slowdown
Government de facto subsidies
(industrial parks, infrastructure,
factory space, loans)
Steel Making Raw Material Prices
Prices of key steel making cost inputs have more than doubled in 2004 and 2005. The
Steeloutlook
Making
Raw Material Prices Indices
for 2006 is for continuing cost pressures...
1990 = 100%
300%
Coal
Iron Ore
Scrap - Chicago #1 Bundles
Slabs - Brazil Export
Index 1990 = 100
250%
200%
150%
100%
50%
20
05
E
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
0%
Source: Iron and Steel Statistics Bureau
Rebar Prices, 1990-2005
(Midwest, $ per ton)
June 2005 = $470
July 2005 = $450
Aug. 2005 = $435
Sept. 2005 = $485
Oct. 2005 = $494
Nov. 2005 = $486
Dec. 2005 = $481
Source: Purchasing Magazine
Wire Rod Prices, 1990-2005
(Midwest, $ per ton)
June 2005 = $505
July 2005 = $472
Aug. 2005 = $469
Sept. 2005 = $523
Oct. 2005 = $492
Nov. 2005 = $503
Dec. 2005 = $503
Source: Purchasing Magazine
Wide-Flange Beam Prices, 1990-2005
(Midwest, 8 x 8, $ per ton)
June 2005 = $516
July 2005 = $506
Aug. 2005 = $496
Sept. 2005 = $545
Oct. 2005 = $560
Nov. 2005 = $574
Dec. 2005 = $587
Source: Purchasing Magazine
U.S. Oil and Natural Gas Prices
…oil prices are the major uncertainty in the outlook for 2006, with
forecasts ranging from thirty-five to seventy-five US$ per bbl…
Natural Gas Cost Impact
…sharp gains in natural gas prices have more than doubled steel
mill gas costs per ton since 2000. Costs for integrated mills have
Natuaral Gas Cost Impact
risen over $30 per ton…
60
50
Integrated Mills
Flat Rolled Mini-Mills
$ per ton
40
Long Product Mini-Mills
30
20
10
0
2000
2001
2002
2003
2004
Aug-05
U.S. STEEL INDUSTRY CONSOLIDATION
(Percent Change, 2000 compared to 2005)
75%
50%
Flat Rolled
Long, Other
25%
0%
-25%
No. of
Companies
No. of
Plants
Capacity
-50%
Mittal Steel weighted average share of all markets
served = ~33% (major product range-15-40%+)
-FRP acquisition price ($/ton, going-concern basis)
2002= $110……..2003-’04=$170……2005=$225
Source: Metal Strategies
Capacity /
Company
No. Plants /
Company
2006
NSA – Spring Meeting
2006 China
CHINA’S CHALLENGES
Area
•Environment
•Consolidations
•Technology/Quality
Comment
Trade policy and laws are not enforced regarding
emissions and effluents; Province versus
Beijing; employment rules, not environment
State-owned facilities; only non-controlling foreign
ownership allowed; antiquated facilities; policy is
20 large producers, push small producers out
Quality in flat rolled will affect export capabilities.
Switch from long to flat not easy
•Inventories
Run full out. Not always market-oriented
•Capital
Will not always be free; could lose state credit
•Personnel
Some “unrest” expressed toward elite class.
Internet is politically uncontrollable
2006 China
China’s Steel Trade Balance
Year
2004
2005
2006
Imports
33.1
27.0
22.0
Exports
20.2
32.5
36.0
(Semi’s)
6.2
9.0
5.0
Steel Trade Balance
-12.9
+5.5
+14
2006 China
COMPLIANCE WITH THE WTO
The National Association of Manufacturers (NAM) recently reviewed
China’s compliance with its WTO commitments in the accession
protocol. While progress has been made in certain areas, there are
serious concerns and problems with effective compliance relating to:
1.
2.
3.
4.
5.
6.
Huge U.S. trade imbalance
Continued currency manipulation
Arbitrary VAT taxes and rebates
Massive counterfeiting and piracy
Discriminatory standards
Inadequate regulatory transparency
2006 China
Chinese steel industry expansion continues in
a region that is deficient in resources (supply
and quality) and environmental compliance…
2006 Prices
2006 Trade
• Section 421 Disappointment – No Relief
• Wire Rod Case – No Import Injury
• Solicit Congressional Assistance & Action
- Ryan/Hunter
- Graham/Schumer
- Other???
• Doha Agenda “only lose?”
2006 Energy
• No National Energy Policy
• For EAFs, Demand Response is “Perfect Peaker”
• Need for Nuclear
• After Metallic Exports, Number One Threat for
Competitiveness
2006 Environment
• Mercury “End of Pipeline” Regulation Risk
(Area Source Rule vs. Negotiated Settlement)
• TOSCA – Not Recognizing Benefits of Recycling i.e.
Automotive Scrap, Fluff, & Slag
• Trend Toward “Measure – Monitor – Control”, vs.
“Under the Bar” Compliance
• Continued Risk With Lost Radioactive Sources,
TRI Reporting, and GGG
2006 Other
• Metallics Exports Concerns
• Transportation Challenges
• Congressional “Gridlock”
• TEA 21 $$$ - Finally
• U.S. Government Financial Policies
& Budget Deficit)
• Need for Border Adjustable Tax
(Trade
NSA – Spring Meeting
SLAG ISSUES
Two Primary Issues:
1. Revision of the Slag Risk Assessment
2. Regulatory Status of Slag as a Product
NSA – Spring Meeting
SLAG RISK ASSESSMENT PROJECT
• Conducted by Steel Slag Coalition
• Anticipate completion, Spring 2006
• Updated to reflect current toxicological data, standards, and
risk methodology
• Work completed, now doing human health portion
• Ecological report will be valuable in responding to potential
impact on the environment
NSA – Spring Meeting
REGULATORY STATUS OF SLAG
• SMA is engaged with EPA and various state agencies that
EAF SLAG IS NOT A WASTE MATERIAL, BUT IS A
USEFUL PRODUCT
• Regulations in Iowa are attempting to classify EAF slag as a
waste under “beneficial reuse” regulations
• SMA is coordinating a federal effort to prompt the EPA to
clarify the status of EAF slag under federal solid waste
regulations
NSA – Spring Meeting
Conclusions
• Hell, it’s still a cyclical business
• We need to continue to work together on slag issues
• Fundamental shift in both demand and supply due to
China & its appetite for raw materials – China is still the
“wild card”. Risk near term is auto’s; long term is China
• Consolidations and discipline have had an impact to
reduce volatility
• Role of inventories affecting pricing and production
• Demand still healthy, construction solid
• Unknowns (Oil, interest rates, auto sector, energy,
freight rates, federal spending, China, China, China)
• Still reasons for meaningful optimism