Transcript Slide 1

NSA Annual Meeting
Steel Industry Update - 2011
Thomas A. Danjczek
President
Steel Manufacturers Association
September 27, 2011
NSA Annual Meeting
Outline
•SMA
•Safety
•Changes
•Steel Demand Drivers & Forecasts
•Raw Materials
•What the U.S. Needs to Do
•Final Thoughts
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NSA 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
NSA Annual Meeting
SMA Safety Overview
• 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
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•
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
Key Drivers
•
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
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Companies and suppliers
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Cohesive and full schedule, all
–
Safety professionals , safety committees, production
managers, and “hourly” employees
work…
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.
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14
12
Lost Time
10
Recordables
8
First Aids
6
4
2
0
Company A
Company B
Company C
Company D
NSA Annual Meeting
SMA Safety Data – 2010-2011
Hours Worked
Fatalities
4
46,000,000
3
45,500,000
45,488,000
45,000,000
Hours Worked
44,500,000
44,000,000
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Fatalities
1
44,349,000
0
43,500,000
2010
2010
2011
Severity Rate
2011
Lost Workday Case Rate
0.75
26.75
0.72
26.74
26.65
0.69
26.55
Severity Rate
26.45
26.35
0.72
0.66
0.65
0.63
26.44
0.6
26.25
2010
2010
2011
2011
OSHA Recordable Rate
3.65
3.6
3.55
3.5
3.45
3.4
3.35
3.3
3.25
3.2
3.15
3.59
OSHA Recordable Rate
3.32
2010
2011
Lost Workday Case
Rate
NSA Annual Meeting
Addresses Six (6) critical areas:
1.
Fatality Prevention Initiative

Confined Space;
Focusing on five priorities
in addressing crane
fatalities:
Fall Protection; LockoutTryout;
◦ operator visibility and
attentiveness;
3.
Mobile Equipment
◦ fall hazards;
4.
Material Handling; and
5.
Rail
6.
Cranes (Completed in 2011)
2.
◦ maintenance;
◦ 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
NSA Annual Meeting
Safety Conclusions
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
NSA 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…
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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
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NSA 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
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NSA Annual Meeting
U.S. finished steel demand forecast
Forecast
Actual ADC
Source: CSM, FW Dodge, AHAM, First River
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NSA 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
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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
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NSA Annual Meeting
Comments on Current U.S. Production
• Underlying weak economy
• Recovery underway, but slow
• Increased exports and imports (5mmt of semi’s imports) YOY
• Not normal cycle of recession, overcapacity; New supply coming
on
• Raw materials costs are a major driver
• CHINA, CHINA, CHINA
• Relative strong demand in auto; construction lagging
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NSA 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
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NSA 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
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NSA 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
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NSA Annual Meeting
China
Can only hope next 5 year plan which calls
for 8% growth is WRONG!
Actual Production
.08 x 600mmt x 5 years = 240mmt…
WOW!
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NSA Annual Meeting
What does the U.S. need to do?
• Assume a Pro-Manufacturing Agenda
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–
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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
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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
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