Plenty to discuss

WHEN inflation began raising its ugly head some time ago, the industry’s Cassandras were quick to chorus the sentiment that the US economy was in the throes of a deep recession which would leave its scars on everyone connected with steelmaking – suppliers, sub-contractors, the industries which relied on steel, workers’ jobs and what have you.

Fortunately, that has not come to pass, or at least not on the scale feared. It was a high-inflation situation with no job losses – a soft landing then? The politicians who support the steel industry, and also expect to be supported by the latter, heaved a sigh of relief that it was not a stagflation, the horror situation that we had experienced in the past. The job market right now is pretty much strong and many industries, including steel, are willing to pay a premium to get good and able workers.

Of interest in this regard is the recently released 2022 Annual Statistical Report by the American Iron and Steel Institute, which is touted as the steel industry’s ‘voice’. The report contains comprehensive data on the US and North American steel industry.

According to the AISI report, US steel shipments in 2022 amounted to 89.5Mt (net tons), down 5.5% from the previous year. The nation’s crude steel production in 2022 declined by 6.2% to 94.7Mt (net tons). Total domestic steel imports into the US declined 2.0% in 2022 over the previous year, while finished steel imports rose 11%, accounting for a 24% share of apparent steel consumption. The construction and automotive industries remained the primary end-use markets for US steel products.

Describing the steel industry as ‘constantly evolving’, AISI president and CEO, Kevin Dempsey, said that the annual statistical report (ASR) provided the industry standard for reporting on the steel industry in the US.

Steel mills remained below 80% capacity as of the third week of June but, as Dempsey puts it, have been ‘inching back toward that key threshold for financial success for the steel sector’.

After years of record profitability, the industry saw imports account for 24% of market share last year as prices started to tumble once again from all-time highs. Steel prices have since been on the mend as automotive orders have picked up and automotive production has risen while appliance manufacturing has remained stable.

Moving on to that hotlydebated subject of tariffs under Section 232, some countries have been quietly trying to get exemption on their exports from steel and aluminium tariffs.

India is a case in point. It had already asked the Biden administration for exemption off tariffs, offering to exempt US agricultural exports from tariffs; however, Washington remained unmoved. The exemption gesture would have been portrayed as an ‘achievement’ during the high-profiled state visit of Indian Prime Minister Narendra Modi to Washington in the third week of June.

Section 232 tariffs were imposed by former President

Amid the ongoing emphasis on decarbonization and producing ‘green steel’ by the industry – which is said to be responsible for generating some 7% to 9% of the world’s CO2 emissions – attention has turned to Boston Metal which reportedly worked for some 10 years to develop, refine and scale technologies aimed at reducing carbon emissions and combatting climate change; the company is trying to reinvent a process, originally developed by the Massachusetts Institute of Technology (MIT), to reduce CO2 emissions.

Boston Metal was formed in 2013 and has since raised a total of $250 million to develop a ‘green path’ to steel production which is the backbone of modern infrastructure construction.

Though Boston Metal has yet to generate revenue and is still working on the final technology to be applied on scale for clean steel production, the company has, nevertheless, signed a $20 million funding arrangement with the International Finance Corp (IFC)., the private sector investment organization of the World Bank.

IFC’s director William Sonneborn has been telling the media that this is the first-ever investment made by the IFC in a pre-revenue start-up, thus underscoring the importance which the World Bank attaches to helping low-income nations produce steel without the CO2 emissions.

Sonneborn, who was recently in Africa, has been pointing out that there are hundreds of millions of people who do not have a proper house and that, at some stage, they will need steel for properlyconstructed houses. Thus, the incremental steel production of the world will not be in the US, even though the technology may have been developed at the MIT. Indeed, the bulk of crude steel, estimated at 59%, was produced in developing countries in 2021, the IFC claims. Boston Metal’s process will be particularly attractive in developing nations that also have access to clean electricity such as Chile, Ethiopia, Malawi, Uruguay and Zambia, according to the IFC.

Meanwhile, Boston Metal, based in Woburn, Massachusetts, has attracted investments from ArcelorMittal, Microsoft’s Climate Fund, and Bill Gates’ Breakthrough Energy Ventures besides the World Bank. It is not surprising that many steel executives are closely monitoring Boston Metal’s activities. American steelworkers have voiced concern over unfair trade which threatened their jobs. At a recent hearing of the Congressional Steel Caucus (CSC), labour and business representatives urged

Congress ‘not to let down its guard’ against unfair trade practices.

The nation’s steel industry, after years of job losses and plant closures resulting from surging imports of – particularly subsidized – steel, has been on a growth trajectory since the start of this decade

Section 232 tariffs imposed during the Trump administration – and retained by the successor Biden administration – have helped stabilize the industry and created thousands of new jobs in the steel industry nationwide, attracting investments in and upgrading of existing steelmaking facilities. The industry is also engaged in reducing CO2 emissions and producing clean steel, with Cleveland Cliffs investing $1 billion to build a direct reduction plant that has helped the company reduce greenhouse gas emissions by some 32%, the company’s CEO and president Lourenco Goncalves recently said.

US Steel has also announced a goal of net zero carbon emissions by the year 2030. However, the problem of excess steel capacity worldwide remains. China continues to be the worst offender of excessive steel production. According to a 2021 report of the Economic Policy Institute, China ‘used subsidies and other forms of distortionary government support to expand steel capacity by 418% (about 930 million metric tonnes) since 2000; it controlled just shy of half of global steel capacity’.

The problem seems to have taken a turn for the worse; China is now investing in steel production in a number of third countries. The United Steelworkers’ legislative director Roy Houseman testified that China will add ‘nearly 100 million tons of steel capacity in Southeast Asia alone, if all planned investments in the region go forward. �