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SFSA Annual Meeting Changing Times in Steel – Safety & Markets Thomas A. Danjczek President Steel Manufacturers Association September 13, 2011 SFSA Annual Meeting Outline •SMA •Safety •Changes •Steel Demand Drivers & Forecasts •Raw Materials •What the U.S. Needs to Do •Final Thoughts 2 SFSA Annual Meeting About the SMA -Composed of 35 North American electric arc furnace (“EAF”) steel producing Member Companies, and 123 Associate Member steel industry suppliers -Today, roughly two-thirds of U.S. steel production comes from the scrap-based EAF process, up from just 10% in the early 1970s -SMA Members account for approximately 80% of total domestic steel capacity SFSA Annual Meeting SMA Safety Overview Key Drivers to the SMA Safety Committee Success • Safety Committee Meetings • SMA Safety Website • Safety Statistics Benching • Upstream/Downstream Safety Marking Awareness • Fatality Prevention Initiative • Education & Outreach • Workplace Specific Safety • First Hand Governmental Surveys • Sharing of Site-Specific Best Practices Compliance Awareness • SMA Safety Awards SFSA Annual Meeting Key to SMA Safety Committee Success Key Drivers to the SMA Safety Committee Success • Need within our industry (2003) – 14 fatalities… • Strong initial leadership • Board top down directives (at every meeting) • Involved core industry members (i.e. 4 leaders plus 6 additional) in planning, soliciting, “boots on the ground” • Inclusive • Awards and Recognitions • OSHA involvement • More focus on industry specific process and procedures versus governmental regulations • Costs - None additional to SMA – Union and non-union - Modest hotels – Companies and suppliers - Cohesive and full schedule, all – Safety professionals , safety committees, production managers, and “hourly” employees work… SFSA Annual Meeting SMA Safety Committee Meetings - Meetings are held in the spring and fall each year - Attendance averages around 100 members, associate members, and guests - Opportunity for sharing information on best practices and new safety tools and protection - Includes a presentation from an OSHA representative - OSHA Director Dr. Michaels addressed group in fall 2010 in Arlington, VA - Usually include an optional plant tour SFSA Annual Meeting Spring 2011 SMA Safety Meeting Held on March 2011 in Jacksonville, Florida •141 Attendees (member company representatives and associate members) • OSHA Update from Compliance Assistance Specialist • Optional plant tour of Gerdau Jacksonville Mill • Agenda Items Included – – – – – – – – – – – – Addressing Contractor/Trucking Fatalities Truck Driver Fall Protection Mobile Equipment Lock Out and Maintenance Pedestrian Pathways Electrical Safety NFPA 70E Compliance Surviving an OSHA Inspection Industrial Hygiene: Hex Chrome and Crystalline Silica Aging Workforce First Aid Emergency All Call Systems Unsafe Act Audits Duel-Hearing Protection SMA Members voluntarily report monthly data on number of recordable cases, lost workday cases, days lost, and hours worked. Compiled year-to-date data is circulated to members as a spreadsheet each month. 20 18 16 14 12 Lost Time 10 Recordables 8 First Aids 6 4 2 0 Company A Company B Company C Company D SMA’s safety documents do not provide an industry standard, and do not set industry best practice. These surveys and guides are intended as tools to assist individuals and companies in their efforts to prevent injuries in the steel industry. The purpose is not to take the place of an individual company policy or procedure, but rather to provide general procedures and practices to assist member companies in developing safe procedures as part of a comprehensive safety program. Addresses Six (6) critical areas: 1. 2. Confined Space; ◦ operator visibility and attentiveness; Fall Protection; LockoutTryout; 3. Mobile Equipment 4. Material Handling; and 5. Rail 6. Cranes (Completed in 2011) Fatality Prevention Initiative Focusing on five priorities in addressing crane fatalities: ◦ maintenance; ◦ fall hazards; ◦ charging the EAF/ladle handling; and ◦ non-routine procedures Videos to be completed by the end of summer and introduced to the SMA in October 2011 Regular questionnaires distributed by member request to address specific safety topics – anonymous results shared with all members -Topics have included: prescription medication, aerial lifts/permits, cellular phone policies, heat illness/fruit program, hot works permit/fire prevention, protective eyewear/sealed eyewear, lifting and rigging/inspections, motivational safety speakers, safety incentives, hearing protection/NRR/sized ear plugs kevlar FR jackets, measuring annual safety performance www.steelsafety.org -Notes and presentations from Committee meetings, 2002-2011 -Safety survey results, grouped by date and topic -Meeting notes grouped by date -Presentations from meetings grouped by date and topic -Catalogue of company incident and near miss reports -Fatality Prevention – document, audit tools, and videos -Radiation safety resources SMA members have many contractors that work on our sites exposing the facility to higher exposure to risk. Improving the safety of the industry means that we must also improve contractor safety on our sites. Many SMA members utilize contractor management systems that allow host steel companies to only allow contractors on-site who have demonstrated past positive safety performance, and have the safety programs in place to ensure safe job performance Contractors are frequently invited to participate in and contribute to company safety committees Spring 2011 meeting included a focus on Contractor Safety SMA partnering with the Association for Iron & Steel Technology to fund Don B. Daily Memorial Fund to promote steel industry safety and health Will challenge North American university teams (students and professors) to submit proposals for grant funding in the theme area of safety and health awareness within the steel manufacturing industry Dual objectives: promote safe workplaces for the steel manufacturing industry, and increase the number of students studying health and safety awareness relative to the manufacturing environment SMA Board of Directors recognizes outstanding safety performance through the annual Don Daily SMA Achievement in Safety Award. ◦ 2011 recipient: Chris Bullard and the Logistics Team Gerdau Ameristeel Midlothian SMA members have made great strides, and will be relentless in pursuit of continuous improvement until we achieve zero injuries in our workplaces SMA members have benefited from relationship with OSHA, including speakers at meetings, training resources, and cooperative programs The SMA, through its members, has been a driving force in improving safety performance SFSA Annual Meeting Deeper Recession Variable Cost Control Scrap Prices High Unemployment Labor Intensity Inventory Levels Changes China Foreign Ownership Consolidations Safety Customer Requirements Environmental Regulations Engineers Transportation Costs Ore Prices Energy Costs Currency State-Owned Enterprises Other Factors… 18 SFSA Annual Meeting Steel Changes 19 SFSA Annual Meeting Raw steel capacity utilization may reach 75% in 2011 Capacity Utilization (%) 100% 90% 80% 70% 60% 50% 40% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011F 20 SFSA Annual Meeting Finished steel demand drivers in US Actual Fitted Three variables drive demand: • NA auto build • Non-residential construction • Appliance shipments R² = 85% Source: First River 21 SFSA Annual Meeting U.S. finished steel demand forecast Forecast Actual ADC Source: CSM, FW Dodge, AHAM, First River 22 SFSA Annual Meeting Auto build & non-res construction expected to recover, but not to previous peak NA Auto Build (Million Units) Source: CSM Worldwide, FW Dodge Forecast Non-Res Construction (Million Sq. Feet) Forecast 23 SFSA Annual Meeting SFSA Annual Meeting U.S. net imports expected to remain lower US Imports & Exports (Million Tons) Net Imports & US Dollar Imports (%) $ Index Net Imports as % of demand (3 year rolling average) Source: AISI, First River 25 SFSA Annual Meeting Comments on Current U.S. Production • Recovery underway, but slow • Increased exports and imports (5mmt of semi’s imports) YOY • Not normal cycle of recession, overcapacity • Relative strong demand in auto; construction lagging 26 SFSA Annual Meeting Raw Materials Raw Material Cost and Availability is #1 Issue for NAFTA Producers • Many countries continue to impose a variety of restrictions on exports of vital raw materials – Export prohibitions – Export duties – Export quotas – Other measures • Trade-distorting restrictions on exports of raw materials – Give domestic producers in the exporting country an unfair advantage – Increase worldwide costs of production – Place a heavy burden on steel industries in developing countries that do not have substantial iron ore reserves or steel scrap supplies 28 SFSA Annual Meeting World Scrap Supply and Consumption, By Region World Scrap Supply, 2008 120 Million Metric Tons 100 80 Domestic Supply 60 Apparent Consumption 40 20 0 EU Turkey CIS NAFTA Latin America China Japan Other Asia Source: World Steel Association 29 SFSA Annual Meeting While China Restricts Exports of Scrap, U.S. Exports to China Have Surged U.S. Scrap Exports to China - 2004 - 2009 Total Quantity Exported (Metric Tons) 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2004 2005 2006 2007 2008 2009 Source: U.S. International Trade Commission - Dataweb 30 SFSA Annual Meeting What does the U.S. need to do? • Assume a Pro-Manufacturing Agenda – – – – – – Business Tax Reform Border Adjustable Taxes Currency Adjustments Energy Independence Reasonable regulatory measures (Environment/Labor) Climate for investments (Jobs, Jobs, Jobs) and Infrastructure • Solve the structural problems that caused the recession - Real Foundation – Bad loans and securities on bank balance sheets – Reduce huge trade deficits • Policy incrementalism is not sufficient 31 SFSA Annual Meeting • • • • • Final Thoughts Ultimately, the world needs greater total supply of scrap and steel U.S. is in a traffic jam, moving slightly forward, but don’t know other consequences. Don’t look to Washington, DC for help Environment of uncertainty and volatility will continue in U.S. industry until economic fundamentals are in equilibrium In U.S., dissatisfaction/perception that U.S. Government is not tackling the right issues (i.e. “It’s the economy, stupid.”) Reasons for optimism in steel in U.S.: – Scrap-based, 70% of cost – local supply – Low cost on global basis (energy is neutral, labor less than 10%, others have higher transportation costs) – Relatively strong U.S. market and U.S. resiliency – Better U.S. company balance sheets 32