Transcript Slide 1

China Iron & Steel Association (CISA)
Metallurgical Council of CCPIT
9th International Trade Conference
State of Steel in the U.S. –
Competing with China
Thomas A. Danjczek
President
Steel Manufacturers Association
Beijing, China
March 24, 2011
CISA: Trade Conference
State of Steel in the U.S. – Competing
with China
OUTLINE
• SMA
• U.S. Steel Production
• Set The Tone – Factors Impacting the U.S.
• Steel Issues From a U.S. Viewpoint (Raw Materials/Scrap)
• Final Thoughts
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CISA: Trade Conference
SMA
The Steel Manufacturers Association (SMA)
• 35 North American companies:
- 30 U.S., 3 Canadian, and 2 Mexican
• Operate 125 steel recycling plants in North America
• Electric Arc Furnace (EAF) steelmakers using recycled steel
• EAF steel producers accounted for nearly 2/3 of U.S. production in 2009
• SMA represents approximately 90 million of U.S. 120 million ton capacity
(75%)
• 128 Associate members - Suppliers of goods and services to the steel
industry
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CISA: Trade Conference
Monthly U.S. and World Steel Capacity Utilization
(Through December)
100%
100%
World Monthly Capacity Utilization
U.S. Monthly Capacity Utilization
95%
90%
90%
85%
85%
80%
80%
75%
75%
70%
70%
65%
65%
60%
60%
55%
55%
50%
50%
45%
45%
40%
40%
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
95%
Source: International Iron & Steel Institute (IISI); KeyBanc
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U.S. Minimill Growth
CISA: Trade Conference
U.S. Capacity and Production Figures – 2000-2010
% Capacity
Total Raw
Steel
Production
(mt)
Total
Shipments
(mt)
% EAF
Share
Integrated
Ore-Based
Share (mt)
%
Integrated
Ore-Based
Share
EAF BasedShare (mt)
118
86.1
102.0
99
46.5
47
52.5
53
2001
114
79.2
90.1
92.6
43.9
47.4
48.7
52.6
2002
103
88.8
91.6
90.7
45.7
50.4
45
49.6
2003
110
84.9
93.7
96.1
49
51
47.1
49
2004
105
94.6
99.7
101
52.7
52.2
48.3
47.8
2005
108
87.5
94.9
102
56.1
55.7
45.9
44.3
2006
112
87.5
98.2
99.3
56.7
57.1
42.6
42.9
2007
113
87.0
98.1
96.5
56.2
58.2
40.3
41.8
2008
113
81.4
91.9
89.3
51.3
57.4
38
42.6
2009
113
49.6
56.0
52
33.3
64
18.7
36
2010E
113
70.0
86.0
-
48.0
64
22.0
36
Year
Total
Capacity
(mt)
2000
Source – U.S. Geological Survey – Iron & Steel Statistics and Information web page =
http://minerals.usgs.gov/minerals/pubs/commodity/iron_&_steel/
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CISA: Trade Conference
U.S. Minimill Growth
EAF Share of Total U.S. Production
70.0%
60.0%
50.0%
40.0%
30.0%
% of EAF Production
20.0%
10.0%
0.0%
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Global EAFs
CISA: Trade Conference
Global Steel Production by Process –
2009
BOF
EAF
World Total
70.6%
28.1%
U.S.
36.0%
64.0%
China (Est.)
90%
10%
(EAFs Growing)
*Remaining 1.3% of world total by open hearth process
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CISA: Trade Conference
World Steel Capacity
Global Steel Capacity Continues to Increase
World Crude Steel Capacity 2000-2012
World Crude Steel Capacity
CAGR
2,100
1,917
2,055
20
1,816
1,850
1,654
1,453
15
1,356
1,350
1,100
1,062
1,062
1,095
1,170
1,245
10
850
600
5
350
Current Average Growth Rate (CAGR)
1,583
1,600
Steel Capacity (million metric tonnes)
1,997
100
2000
Source: Worldsteel
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010(e)
2011(e)
2012(e)
0
8
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CISA: Trade Conference
Imports
2010
23.9mnt
U.S. Steel Imports/Exports
2009
16.2mnt
Comments
Up 47% YOY
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CISA: Trade Conference
Comments on U.S. Production
• Recovery underway, but slow
• Increased exports and imports (5mmt of semi’s imports)
• Not normal cycle of recession, overcapacity
• Relative strong demand in auto; construction lagging
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CISA: Trade Conference
U.S. Tone
Economy
• While the recession officially ended in June 2009, the sluggish pace of the recovery
remains a top concern for both the public and policymakers
– “Official” Unemployment remains at close to 9.5% and consumer income and spending are fairly
stagnant
• According to a recent Bloomberg News survey of economists, the unemployment rate will stay high for the
next year, averaging 9.3%
Deficit
• The need for policies to promote economic growth in the short-run is complicated
by the need/desire for longer-term austerity measures to address the nation’s
deficit and long-term debt
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CISA: Trade Conference
U.S. Tone
Addressing China’s trade practices
• U.S. Senators Sherrod Brown (D-OH) and Olympia Snowe (R-ME) and U.S.
Representatives Sander Levin (D-MI), Tim Murphy (R-PA), and Tim Ryan (D-OH)
introduced in February 2011 the Currency Reform for Fair Trade Act of 2011. Including
Congressmen Levin, Murphy, and Ryan, the House bill was introduced with 101 original
sponsors (27 R; 74 D).
• Last October, U.S. Trade Representative Ron Kirk announced that the United States had
initiated an investigation of China’s practices affecting trade and investment in green
technologies—will Congress enter the debate?
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CISA: Trade Conference
U.S. Tone
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
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Steel Issues from a U.S. Viewpoint
Raw Materials
Raw Material Cost and Availability is #1 Issue
for U.S. Steel 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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Steel Issues from a U.S. Viewpoint
Raw Materials
Meanwhile, Foreign Government Subsidies to Steel and
Steel-Related Industries Remain a Particular Concern…
• Foreign government subsidies are a major cause of overcapacity in the global steel
industry and steel-related industries
• Subsidies to steel and steel-related industries that 1) support inefficient and excess
capacity , and/or 2) distort trade, are continuing and remain a particular concern
• Examples include:
– Fundamental currency misalignment/undervalued currencies
– Preferential financing to add new capacity
– Loan forgiveness/equity infusions to prop up obsolete capacity
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Steel Issues from a U.S. Viewpoint
China – Raw Materials
• The United States, the EU, and Mexico have
challenged China’s application of a variety of
restrictions to exports of key raw materials used in
steelmaking, including:
–
–
–
–
Coke
Refractory bauxite
Fluorspar
Zinc
• The restrictions China applies include:
– Export duties
– Export quotas
– Restrictive bidding procedures
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Steel Issues from a U.S. Viewpoint
China – Raw Materials
• China has argued that these measures are justified to prevent
pollution and to preserve natural resources
• China has also claimed a “sovereign right to regulate” its raw
material exports
• The panel will release its decision this year:
– The interim report is due February 18, 2011
– The final report is due April 1, 2011
• This decision could have a major impact on international trade in
raw materials for steelmaking – “Careful what you wish for…”
• Many other countries also restrict exports of raw materials,
especially steel scrap
• USTR is very interested in a potential case regarding China’s
restrictions on exports of rare earths and other raw materials
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Steel Issues from a U.S. Viewpoint
Implications
• If these justifications are accepted, ever scrap producer could
legitimately limit exports of steel scrap
• This would wreak havoc on the global steel industry
• Countries that are heavily dependent on scrap imports would be
particularly affected
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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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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
Source: U.S. International Trade Commission - Dataweb
2006
2007
2008
2009
Steel Issues from a U.S. Viewpoint
Scrap
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
•
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
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Steel Issues from a U.S. Viewpoint
Scrap
Exports and Imports
The world’s leading net exporters of scrap in 2009
were:
-United States (19.5 million MT)
-Japan (9.2 million MT)
-United Kingdom (5.8 million MT)
-Germany (3.4 million MT)
The world’s leading importers of scrap in 2009 were:
-Turkey (15.7 million MT)
-China (13.7 million MT)
-Korea (7.8 million MT)
-India (5.1 million MT)
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Steel Issues from a U.S. Viewpoint
Scrap
Forms of Export Restrictions
•
•
•
•
•
•
Export bans
Quotas
Export taxes
No VAT export rebates
Non-automatic (discretionary) licensing requirements
Other administrative barriers (such as port restrictions)
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Steel Issues from a U.S. Viewpoint
Scrap
Effects of Export Restrictions
•
•
•
•
•
Reduced international supply
Higher international prices
Lower prices on raw materials in countries with export
restrictions
Subsidy to downstream industries in countries with export
restrictions
Price volatility
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CISA: Trade Conference
Final Thoughts
• Ultimately, the world needs greater total supply of scrap
– Scrap supply from traditional sources (U.S., EU, Japan) is approaching its practical limit
• U.S. is in a traffic jam, moving slightly forward, but don’t know other
consequences
• Reasons for U.S. optimism in steel
– 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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