Transcript Slide 1
STAHL 2011
Wissen, Werkstoff, Werte
Knowledge, materials, values
Competitive Conditions on Regional Steel Markets Changing Times in the North American Steel Industry
Thomas A. Danjczek President, Steel Manufacturers Association 1 | 10.11.2011 · STAHL 2011 · © Stahlinstitut VDEh | Wirtschaftsvereinigung Stahl
Stahl-Zentrum
STAHL 2011
•
SMA
•
Safety
•
Changes
•
Steel Demand Drivers & Forecasts
•
Raw Materials
•
Tone in Washington, DC & Regulations
•
What the U.S. Needs to Do
•
Final Thoughts
Outline
2
STAHL 2011
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
STAHL 2011
Where SMA Member EAFs are located… 4
STAHL 2011
SMA Safety Overview
Key Drivers to the SMA Safety Committee Success
• • Safety Committee Meetings Safety Statistics Benching Marking • • Fatality Prevention Initiative • Workplace Specific Safety Surveys Sharing of Site-Specific Best Practices • SMA Safety Website • Upstream/Downstream Safety Awareness • Education & Outreach • First Hand Governmental Compliance Awareness • SMA Safety Awards
STAHL 2011
Addresses Six (6) critical areas: 1.
2.
3.
4.
5.
6.
Confined Space; Fall Protection; Lockout-Tryout; Mobile Equipment Material Handling; and Rail Cranes (Completed in 2011)
Fatality Prevention
Focusing on five priorities in addressing crane fatalities: ◦ operator visibility and attentiveness; ◦ 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
Fatality Prevention Initiative
STAHL 2011
Hours Worked
46 000 000 45 500 000 45 000 000 44 500 000 44 000 000 43 500 000 44 349 000 2010 45 488 000 2011 26,75 26,65 26,55 26,45 26,35 26,25
SMA Safety Data – 2010-2011yoy
Fatalities
Hours Worked 1 0 4 3 2 2010 2011 Fatalities 26,44 2010
Severity Rate
26,74 Severity Rate 0,75 0,72 0,69 0,66 0,63 0,6 2011
Lost Workday Case Rate
0,72 2010
OSHA Recordable Rate
0,65 2011 Lost Workday Case Rate 3,59 OSHA Recordable Rate 2010 3,32 2011
STAHL 2011
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
STAHL 2011
Deeper Recession Variable Cost Control Scrap Prices High Unemployment Labor Intensity Inventory Levels China Safety Consolidations Customer Requirements Environmental Regulations Engineers Other Factors… US Changes Foreign Ownership Transportation Costs Ore Prices Energy Costs Currency State-Owned Enterprises 9
STAHL 2011
Steel Changes 10
STAHL 2011
In USA, 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
11
STAHL 2011
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 12
STAHL 2011
U.S. finished steel demand forecast
Forecast
Actual ADC
Source: CSM, FW Dodge, AHAM, First River 13
STAHL 2011
Auto build & non-res construction expected to recover, but not to previous peak
NA Auto Build (Million Units)
Forecast
Non-Res Construction (Million Sq. Feet)
Forecast Source: CSM Worldwide, FW Dodge 14
STAHL 2011
STAHL 2011
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 16
STAHL 2011
• • •
Comments on Current N.A. Steel Industry
Underlying Weak Economy Recovery underway, but slow, last 4 weeks???
North American steel market under pressure with unused capacity • Increased exports and percent imports (5mmt of semi’s imports) YOY • Not normal cycle of recession, overcapacity; new supply coming on • • Relative strong demand in auto; construction lagging Raw material costs, and variable cost controls are major drivers • Scrap prices expected to trend slightly lower next two months – too early to call a trend • • China, China, China Market cap values at historic lows 17
STAHL 2011
• • • • •
The Tone in Washington, DC
It’s the Economy, stupid… Dissatisfaction/Perception that US Government is not tackling right issues (More for Wall Street than Main Street during recession) (Growing deficit, skepticism about role of government) GRIDLOCK (Democratic President & Senate; Republican House) Trouble for Incumbents Lack of Coherent China Policy (Currency?) Recognition that China has flagrantly violated WTP Rules – i.e. Raw Materials 19
STAHL 2011
• • •
Regulations
Vigorous oversight of EPA, OSHA, Dept. of Labor, etc., is a general theme from the Administration Prospects for comprehensive climate change legislation are weak – will see continued Congressional efforts to slow down EPA’s regulation of carbon emissions Overwhelming burden of proposed regulations (Power Plant
Emissions; EAF Mercury; Solid Waste, Boeing Case; Silica; Noise; Dust;
Record Keeping, etc., etc., etc.) 20
STAHL 2011 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 21
STAHL 2011
National Export Restrictions On Ferrous Scrap Trade
Export Bans Quotas Export Taxes Elimination of VAT Export Rebates Non-automatic (discretionary) Licensing Agreements Other Administrative Barriers (i.e. –Port Restrictions)
22
STAHL 2011
World Scrap Exports, 2000 - 2010
120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 23
STAHL 2011
Share of World Scrap Exports, 2010
USA 23% Other 38% Russian Federation 5% Canada 6% Japan 7% EU-27 21% USA EU-27 Japan Canada Russian Federation Other 24
STAHL 2011
Major Scrap Importers, 2010 and 2009
Country
Turkey Korea China India Taiwan USA EU-27
2010
19.20
8.7
5.8
4.7
4.2
3.8
3.6
2009
15.7
7.8
13.7
5.1
3.9
3.0
3.3
25
STAHL 2011
World Scrap Supply and Consumption, By Region
World Scrap Supply, 2008 60 40 20 0 120 100 80 EU Turkey CIS
Source: World Steel Association
NAFTA Latin America China Japan Other Asia Domestic Supply Apparent Consumption
26
STAHL 2011
While China Restricts Exports of Scrap, U.S. Exports to China Have Surged
U.S. Scrap Exports to China - 2004 - 2009
7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0
2004 2005 Source: U.S. International Trade Commission - Dataweb 2006 2007 2008 2009
27
STAHL 2011
Can only hope next 5 year plan which calls for 8% growth is WRONG!
China
Actual Production .08 x 600mmt x 5 years = 240mmt… 281mmt compounded WOW!
28
STAHL 2011
Scrap Demand Forecasts
Scrap demand (mt) –
2017
29
STAHL 2011
World Demand For Steel Scrap
World demand for steel scrap is likely to continue to increase
• • •
Increased Steel Production In China, India and Brazil Economic Recovery Limited Growth of Alternative Iron Units
But A Large Number of Countries Still Impose Restrictions On Exports of Scrap and Other Raw Materials Steel Scrap Is Subject To More Export Restrictions Than Any Other Raw Material There Is A Significant Problem With Transparency Because Export Restrictions Change Frequently, Making Supply Even More Problematic
30
STAHL 2011
• • • •
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 Stop the trade distorting restrictions in raw materials or ensure prompt reciprocity (SOEs?) Policy incrementalism is not sufficient 31
STAHL 2011 Final Thoughts
• • • • • In steel, the world has changed (Developing world, not about USA, getting tougher, ownership) 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, last 4 weeks???
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, 75% 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
STAHL 2011
Wissen, Werkstoff, Werte
Knowledge, materials, values
Competitive Conditions on Regional Steel Markets
THANK YOU FOR YOUR ATTENTION
Thomas A. Danjczek President, Steel Manufacturers Association
Stahl-Zentrum
33 | 10.11.2011 · STAHL 2011 · © Stahlinstitut VDEh | Wirtschaftsvereinigung Stahl