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January/February 2014 – Vol.38 No.1 – www.steeltimesint.com
NEWS TRANSPORT & SCHEDULING ANALYSIS & TESTING
STEEL TIMES INTERNATIONAL – January/February 2014 – Vol.38 No.1
EXCLUSIVE INTERVIEW: DR. EDWIN BASSON, WORLDSTEEL
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CONTENTS STI_30_AIT_0110 1/20/14 2:56 PM Page 1
CONTENTS JANUARY/FEBRUARY 2014
January/February 2014 – Vol.38 No.1 – www.steeltimesint.com
NEWS TRANSPORT & SCHEDULING ANALYSIS & TESTING
Front cover image courtesy of America’s Central Port. www.americascentralport.com
EXCLUSIVE INTERVIEW: DR. EDWIN BASSON, WORLDSTEEL
EDITORIAL Editor Matthew Moggridge Tel: +44 (0) 1737 855151 matthewmoggridge@quartzltd.com Consultant Editor Dr. Tim Smith PhD, CEng, MIM
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2 Leader 4 News 10 USA update Calvert buy-out creates big ripples 12 Latin America update Locally produced or imported? 14 China update What future for China’s steel wire trade?
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Production Editor Annie Baker SALES International Sales Manager Paul Rossage paulrossage@quartzltd.com Tel: +44 (0) 1737 855116 Area Sales Manager Anne Considine anneconsidine@quartzltd.com Tel: +44 (0) 1737 855139
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Sales Director Ken Clark kenclark@quartzltd.com Tel: +44 (0) 1737 855117 Marketing Executive Annie O’Brien annieobrien@quartzltd.com Tel: +44 (0) 1737 855012
15 Exclusive interview Edwin Basson, director-general, worldsteel 20 Testing and analysis The importance of good R&D 24 Company profile Danieli - still growing and thriving
Advertisement Production Martin Lawrence martinlawrence@quartzltd.com SUBSCRIPTION Elizabeth Barford Tel +44 (0) 1737 855028 Fax +44 (0) 1737 855034 Email subscriptions@quartzltd.com Steel Times International is published eight times a year and is available on subscription. Annual subscription: UK £163.00 Other countries: £233.00 2 years subscription: UK £308.00 Other countries: £441.00 ) Single copy (inc postage): £37.00 Email: steel@quartzltd.com
Published by: Quartz Business Media Ltd, Quartz House, 20 Clarendon Road, Redhill, Surrey, RH1 1QX, England.
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Tel: +44 (0)1737 855000 Fax: +44 (0)1737 855034 www.steeltimesint.com Steel Times International (USPS No: 020-958) is published monthly except Feb, May, July, Dec by Quartz Business Media Ltd and distributed in the US by DSW, 75 Aberdeen Road, Emigsville, PA 17318-0437. Periodicals postage paid at Emigsville, PA. POSTMASTER send address changes to Steel Times International c/o PO Box 437, Emigsville, PA 17318-0437.
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38 ISSN 0143-7798
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30 Conference report 54th Alacero conference, Lima, Peru 33 Transport & scheduling New initiatives bring hope 36 Rolling AHMSA’s plant built in a year 38 Perspectives: Guild International An amazing future ahead 40 History – Men of iron, men of steel January/February 2014
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LEADER
China: a ‘significant player’ for years to come
Matthew Moggridge Editor matthewmoggridge@quartzltd.com
My appointment as editor of Steel Times International coincided with the release of a new Superman movie, entitled, appropriately enough, Man of Steel. It enabled me to joke with anybody who was interested that I was now ‘a man of steel’– minus the cape, of course, and I’ve never pretended that I can fly. Having spent the last 15 months or so travelling the world interviewing CEOs of leading aluminium producers – in Europe, the Middle East and North America – and extolling the virtues of the ‘miracle metal’, I now find myself ‘on the other side of the fence.’ Fortunately, the issues affecting the global steel industry are similar to those facing aluminium companies, although in some cases the angle is different. In automotive, for example, while the aluminium industry is obsessed with ‘lightweighting’ and tailpipe emissions, there is a wider argument, put forward by the steel industry, that a ‘lifecycle assessment’ is a more accurate way of determining what is best for the environment. The truth is that it’s not a case of choosing one over the other. With global steel production in the region of
1.6 billion tonnes, it’s important to realise that between 13 to 15% of that finds its way into automotive – that’s 150Mt to 200Mt. With aluminium, assuming annual global production of 80 to 90Mt, while 53% goes to automotive, that’s only 30 to 40Mt. A broader view needs to be taken, but the reality is that there’s room for everybody and if you consider that a car made entirely out of carbon fibre might reduce emissions, it would also be wise to remember that the process of producing carbon fibre is vastly more ‘emittent’ than aluminium or steel. It’s a never-ending argument. Getting back to that Superman analogy, perhaps the steel (and aluminium) industry’s ‘Lex Luther’ is China, although, as Edwin Basson, director general of worldsteel, points out in an exclusive interview in this issue, ‘China is a very significant player on the world steel market and will continue to be an important player even 10 years from now’. Right, I need a change of clothes. Where’s the nearest phone box and is it made from steel or aluminium?
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January/February 2014
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4 NEWS IN BRIEF Tata’s Korean pipe contract Tata Steel Europe has entered into a multi-million pound pipe contract in Iraq with the Korea Gas Corporation (KOGAS). The contract – Tata’s largest ever in Iraq – embraces the manufacture and supply of 16in diameter pipe for the country’s Kirkuk to Baiji Dry Gas Project.
Network Rail sources Tata steel The British rail infrastructure company Network Rail intends to source over 95% of its rail from Tata Steel until 2019 – with the option of extending the contract until 2024 – as part of a five-year plan of renewal and enhancement of the network.
Keetac wins safety award Keetac, the United States Steel Corporation’s mining arm, is the proud recipient of a Sentinels of Safety Award from the US-based National Mining Association (NMA). The award was presented at an official dinner in Washington DC last month and is designed to recognise and honour the USA’s safest mining operations.
AIIS appoints new executive director Richard Chriss is the new executive director of the American Institute for International Steel (AIIS). He takes over from David Phelps, who is retiring. Chriss took up his new role on November 18th last year.
Revamped converter ThyssenKrupp
for
SMS Siemag has upgraded a converter unit for ThyssenKrupp Steel Europe in Duisburg-Bruckhausen, Germany. The upgraded 400-ton converter is claimed to be one of the largest of its kind worldwide.
Yong longs for 2015 return to profit Chinese state-run Hebei Iron & Steel Group hopes to return to profit by 2015, according to chairman Yu Yong. Having made a profit in 2011 of 1.3 billion yuan, the company made a loss in 2012 of 1.2 billion yaun (US$198 million). Source: Bloomberg.
For more steel industry news and features, visit www.steeltimesint.com January/February 2014
INDUSTRY NEWS
Steel traders swap metal for booze and cigarettes In order to survive what is being described in China as a ‘meagre profit period’ for the steel industry, Chinese steel traders have abandoned the practice of hoarding steel at low prices for delayed sales at a higher price. According to a report by China Metals, steel traders only place orders with steelmakers after receiving orders from end-users and most opt for direct delivery to save warehousing and logistics costs. Social stockpiles’ of steel have continued to fall. Some steel traders have started new businesses. Haotian Steel of Tianjin City is now supplying steel makers with raw materials, such as billets, iron ore powders and cok-
ing coal as its mainstream steel trade has tailed off over the past two years. The company is also getting involved in mining and the deep processing of steel products. Other companies – Jinghua Shengye, Ji Yumin and Bailian Xiongye – have also moved both upstream and downstream of their original remits. Some traders have diversified into the cigarette industry, the chateau business, the world of culture and the alcohol trade, not forgetting one trader, Hao Yun Fa, who branched out into the world of lavender estates. The Chinese steelmaking industry made an average profit of
RMB0.84/tonne in the first 10 months of 2013 during which time it produced 652Mt of crude steel. The combined revenue of the country’s major steelmakers was RMB12.97 billion, according to the China Iron & Steel Association (CISA). The average price per tonne of Chinese steel was RMB3.462 (January to October 2013) which was down by 8.94% over 2012 prices. Such a price decline has cut overall steel sector revenues by RMB26.62 million. China’s steelmaking industry will remain in troubled waters in 2014 due to the country eliminating excess production capacity.
New law delays Afghanistan project The passing of a new mining law designed to support private investments and protect the interests of foreign investments in Afghanistan is delaying a deal between the Afghan government and a consortium led by the Steel Authority of India Ltd (SAIL). If all goes to plan, the consortium – Afghan Iron & Steel Consortium – will develop iron ore mines in the
Hajigak region 100km west of Kabul where, it is estimated, there is 1.8 billion metric tonnes of iron ore. Afghanistan’s agriculture minister, Asif Rahimi, said that his government was still keen to press ahead with the deal, despite the fact that it was initially offered two years ago. The aforementioned new mining law has yet to be passed by the
Afghanistan government. Should it go ahead, the US$11 billion project will represent the largest of its kind in the war-ravaged country and will include a 6Mt steel plant at Hajigak as well as road and railway links with potential markets. The consortium is led by SAIL, but also includes others, such as JSW Steel. Source: Business Standard.
Indian steel demand slows down Policy paralysis in the Indian government is the biggest reason behind a slowing in steel demand in India, claims Mumbai-based analyst Nirmal Bang Equities Pvt in a recent Bloomberg news report. India’s leading steelmakers expanded capacity by 50% over the last two years, but when anticipated demand failed to materialise, the steel produced found itself languishing as unsold inventory. Shares for Tata Steel fell 3.3% while Steel Authority of India Ltd (SAIL) shares dropped 3.2% to Rs.394.70 and Rs.69.75 respectively. Over the past year Tata’s shares have dropped 10% while SAIL’s have fallen 30%. It has certainly proved a challenging period for Tata Steel as its
expansion coincided with a decline in passenger car sales in India; and while SAIL hopes to expand its capacity by 60%, planned expansion costs could be higher than expected. Tata Steel’s total debts are a staggering $10.5 billion while SAIL’s are $3.62 billion. The two steel producers’ debt-to-equity ratios are 153% and 54% respectively. A more positive story comes from JSW Steel. The company’s output is likely to rise more than 40% thanks to improved iron ore supplies from the state of Karnataka, widening the company’s EBITDA margin from 17.06% to 17.39%. Industry experts believe that JSW will out-perform its peers in 2014.
According to the Reserve Bank of India, the steel industry is responsible for 24% of bank loans and over 50% of non-performing advances.
Steel demand in India rose 3.3% to the end of March 2013 and the country’s central bank estimates that the Indian economy will expand by 5% through to March 2014. Source: Bloomberg. www.steeltimesint.com
STI news JAN FEB_03-20_AIT_0110 1/15/14 4:09 PM Page 2
INDUSTRY NEWS
Chinese steel demand weakens Analysis by MySteel has revealed that steel demand in China is weakening. Prices of thick and medium steel sheets have rebounded in most Chinese cities over the past week with Tianjin, Guangzhou and Harbin all experiencing per tonne price hikes of between RMB10 and RMB80. Towards the end of 2013, a survey by MySteel found that around
65% of respondents expected a consolidation in prices for hotrolled steel sheets and coils. The survey also revealed that 27% of respondents expected prices to drop while 9% expected a price hike. Baosteel will be raising factory prices for January orders across most product lines by between RMB50 to RMB100 per tonne with the exception of colour-coat-
ed steel, which will go up by RMB100 per tonne. Baosteel’s price hike means that it has received ‘quite good orders’ and is in bullish mood for early 2014. Automotive sales and production were both up at 14% and 21% and it now looks as if other steelmakers in China will put up their prices. Source: China Metals.
Tata results show ‘positive momentum’ The Tata Steel Group has announced its H1 and Q2 2013 consolidated results, claiming that a ‘positive momentum’ in earnings has continued – boosted by a steady ramp-up of Indian operations and improved performances in Europe and South East Asia. Net profits for Q2 2013-14 stand at Rs91.7 billion compared with a Rs3.64 billion loss for the same period the previous year. Net profits for H1 2013-14 were Rs205.6 billion compared to Rs23.4 billion in the first half of 2012. The company’s group steel deliveries for H1 2013-14 increased to 12.56Mt, up from 11.74Mt for the same period last
year. The Q2 2013-14 deliveries figure was 6.48Mt compared to 6.08Mt in Q1 and 6.07Mt for Q2 2012-13. In India, heavy monsoons and weaker economic conditions dampened the company’s steady ramp-up of capacity, although flat products, merchant mill and new bar mill achieved their best ever half yearly production. Deliveries from India increased by 22% to 4.04Mt for H1 2013-14 compared with 3.32Mt for H1 2012-13. Q2 deliveries for 201314 were 2.04Mt, up from 1.73Mt from Q2 2012-13. In Europe, Q2 2013-14 production increased to 3.86Mt from 3.74Mt in the previous quarter,
which equates to a 16% increase over Q2 2012-13. European deliveries for H1 2013-14 totalled 6.6Mt compared 6.63Mt the previous year. Q2 2013-14 figures increased by 10% from 3.14Mt to 3.46Mt and by 1% compared to Q2 2012-13. A furnace shutdown in Singapore adversely affected Tata’s South East Asia operations, but volumes improved significantly at NatSteel and the company’s Thai operations. Deliveries from South East Asia for H1 2013-14 increased 22% from 1.49Mt (in H1 2012-13) to 1.82Mt. Q2 2013-14 deliveries were 96kt, up from 86kt in Q2 2012-13.
An abundance of accidental deaths Reports online point to a number of accidental deaths in steel plants and iron ore mines around the world. An explosion and fire at a US Steel plant in Ecorse, Michigan, injured two and killed one worker. US Steel claims the explosion happened in the plant’s steel shop and that the dead man was remote control locomotive operator Antonino Palazzolo, who was 32 years old. Steelmaking at the plant was halted as the nature of the explosion was being investigated. Meanwhile in Pohang, North Gyeongsang Province, South Korea, two construction workers were found dead at the company’s Finex steel mill. A POSCO spokeswoman told the Korean Times that there are two possible reasons: they fell to their deaths or died after inhaling toxic gas leaking from an adjacent www.steeltimesint.com
nitrogen tank. The Korean Times also reports that a worker at Hyundai Steel’s Dangjin plant in South Chungcheong Province was killed after inhaling toxic gas leaking from a power plant. Hyundai Steel
is South Korea’s second largest steelmaker. And finally, Henry Michael Fayiah, a former Mittal Steel geologist, died on 12 December while on duty at ArcelorMittal’s Yekepa mine.
NEWS IN BRIEF 5 FEDIL Environment Award for Paul Wurth Paul Wurth’s dry slag granulation process with energy recovery has won the Business Federation of Luxembourg’s (FEDIL) Environment Award 2013. Paul Wurth developed an alternative slag treatment process designed to recover the energy contained in the slag while maintaining unchanged the physical properties of the granulated slag.
Fire and explosion cause injury at steel plants A fire at a steel plant in the UK owned by Tata Steel and an explosion at a Nippon Steel & Sumitomo Metal Corporation facility in Japan have both resulted in worker injuries. Three people were injured, one with serious burns and the others with minor injuries, after an explosion at Nippon Steel & Sumitomo Metal Corporation’s Yahata plant in southwestern Japan late last year. In the UK a fire at Tata Steel’s Scunthorpe facility in late November last year resulted in three people being taken to hospital suffering from radiated burns.
‘Punitive duties’ on South Korean steel A punitive duty on South Korean steel products coming into the USA is likely to come into force soon as the American steel industry voices concern over unfairly low prices for seamless rolled products, such as drill pipe, casing and tubing. The US imports up to 98.5% of its seamless rolled products and now the US steel industry wants anti-dumping duty of up to 150% on South Korean products. Source: www.globalpost.com
Vietnam imposes anti-dumping tariff on Malaysian steel Vietnam has imposed an antidumping rate of 14.38% on coldrolled stainless steel coils produced by the Malaysian company, Bahru Stainless. Bahru exports around 7kt of the product to Vietnam (worth $15.2M) and is one of a number of Malaysian producers exporting almost 60kt of cold-rolled stainless steel internationally. Malaysian Iron and Steel Industry Federation president, Soh Thian Lai, described the move as unfair and likely to have an adverse effect on Malaysian exports to Vietnam.
January/February 2014
STI news JAN FEB_03-20_AIT_0110 1/15/14 4:09 PM Page 3
6 INDUSTRY NEWS
Voestalpine plans major expansion In keeping with its plans to expand outside of Europe, Austrian steel company Voestalpine has announced a EUR1 billon spending spree over the next three years. The company intends to increase annual revenue from its year-end March 2013 figure of EUR11.5 billion to EUR20 billion by 2020. While most of Voestalpine’s current revenues come from Europe, 28% is from markets in North America, Asia and Brazil. CEO Wolfgang Eder wants to increase income from outside of Europe, claiming growth can only come from emerging markets. The plan is to open at least 15 new plants in China and triple Asian revenue to more than EUR2 billion.
POSCO downgraded by Moody’s Moody’s has cut South Korean steelmaker POSCO’s foreign currency bond rating from Baa1 to Baa2, claiming that the company’s financial leverage will remain elevated and weak over the next two years and that the situation is exacerbated by the current weakness of the steel industry in the region. According to Moody’s, POSCO will achieve ‘robust growth’ from its non-steel business and benefit from its largescale expansion in steel capacity. However, moderate profitability and investments of over US$4.7 billion will weaken the company’s ability to generate positive cash flow and reduce its financial leverage. Moody’s acknowledged POSCO’s leading position in the Korean steel industry, its globally competitive cost position and its diversified product mix. Source: Yonhap News Agency/Global Post. For expansion of these stories and other news visit www.steeltimesint.cim
January/February 2014
Chinese scrap: mixed views Shagang Group, a privatelyowned Chinese steelmaker, claims it will use a total of 5.5Mt of scrap this year following an EAF startup in November 2012. The scrap the company doesn’t produce itself will be sourced predominantly through contracts. Shagang holds around 300kt of scrap and has already bought 800kt from Fengli, China’s biggest scrap dealer, although it claims it has yet to receive 100kt of that amount. On a daily basis, Shagang buys between 7kt and 8kt of scrap and produces around 2kt/day from its own operations. Earlier this year, Shagang’s daily scrap purchase volume soared to 12kt. Other Chinese steel companies operating in eastern Chinese provinces offer mixed reports with Nangang (Nanjing Iron & Steel) reporting its scrap consumption down 20kt over 2012 figures, and
Hangzhou Iron and Steel claiming it will consume 600kt this year, a higher figure than last year due to a blast furnace turnaround in 2012.
expects scrap consumption to rise from 1.8Mt to 1.9Mt last year to 2.3Mt. The company has a 100kt scrap inventory and is currently buying 7kt/day compared to its
State-owned Hanggang, claims its scrap inventory levels will rise to 50kt by the year-end. Xicheng Steel, a privately owned producer of longs and flats,
usual 2-3kt. Looking at China overall, annual scrap consumption was down 12.3% (2012).
Positive results from Vale Brazil-based global mining company Vale has released details of its Q3 2013 financial results and claims ‘across the board’ improvements. Operating revenues for the quarter were US$12.9 billion; operating income was US$4.8 billion, operating margin was 37.7% and adjusted EBITDA was US$5.9 billion. With underlying earnings totalling US$3.7 billion, Vale claims increases were achieved from quarter -on-quarter and yearon-year. The main drivers of Vale’s positive results were the expected recovery in iron ore and pellet shipments at 83.6Mt (the third largest in the company’s history) and higher prices. The cash cost of iron ore fell to US$22.10/metric tonnes down from US$24.15 for Q2 2013. Vale also claims that a cost-cutting exercise was behind its latest
results, explaining how the company has been taking steps ‘to build a lean organisation, minimising operating costs and expenses as well as investment costs and focusing on productivity growth’. During the first three quarters of 2013 Vale saved US$2 billion. Operating costs were reduced by US$1.1 billion (6.7%) while sales, general and administrative expenses were reduced by US$621 million (41.6%). The company also managed to slash research and development expenditure by US$479 million (47.1%) and claims that these reductions have been ‘clearly a key factor in the improvement of our performance this year.’ Adjusted EBITDA for the first nine months of 2013 totalled US$16 billion, 8.8% higher on a year-on-year basis, and when put together with Vale’s cost-cutting activities offset the company’s
US$828 million decline in gross revenues, which were caused by lower prices. Excluding acquisitions, Vale reduced investments by US$11 billion for the first nine months of 2013, down US$1.2 billion on the previous year. Vale recently signed an agreement to sell 35.9% of its logistics company VLI for US$2.7 billion and is looking to sell a further 26%, reducing its own stake to 26%. Expansion of the Carajás Railway – which will transport iron ore produced by the Carajás mining complex in Brazil’s Para state – and the addition of a 40Mt/yr dry ore processing plant (designed to reduce operating costs and increase productivity) are both part of projects designed to expand the company’s logistics and increase iron ore production capacity.
USA accuses Turkey of anti-dumping Turkish steel producers can look forward to an anti-dumping suit, courtesy of Columbia, following a US investigation, claims Namik Ekinci, chairman of the Turkish
Steel Exporters’ Union. Ekinci believes that the on-going US investigation will work in favour of Turkish producers simply because, he argues, they have not been
involved in anti-dumping. Ekinci said that, in the past, the European Union and Egypt have filed anti-dumping suits on Turkish producers. www.steeltimesint.com
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8 DIARY OF EVENTS February 5-7 4th International Conference on Automation & Information technology in Iron & Steel Making Processes Ranchi, India www.aitsim.in/pdf/aitism_14_first_ announcement.pdf
12-13 European Oxide Scale Conference (OXI 2014) The Institute of Materials,Minerals & Mining,London, UK. Oxide scale formation, control and removal in high temperature metals processing. Contact: chiara.jobson@iom3.org Tel: + 44 (0) 207 451 7302. 16-20 TMS 2014 The TMS Annual Meeting and Exhibition brings together more than 4,000 business leaders, engineers, scientists and other professionals in the materials field for an exchange of technical knowledge leading to solutions in the workplace and in society. Venue: San Diego Convention Centre, San Diego, California, USA. www.tms.org/meetings/annual14/am14registration.aspx
March 17-19 20th CRU World Steel Conference Radisson Blu Alcron Hotel, Prague, Czech Republic
Major conference addressing the issues of importance to the global steel industry. www.crugroup.com
23-26 CONAC 2014 – Sixth Steel Industry Conference & Exhibition Monterrey, NL, Mexico Contact: mmolina@aistmexico.org.mx or lbautista@aistmexico.org.mx
April 7-8 The 1st European Steel Technology & Application Days (ESTAD) and the 31st Journées Sidérurgiques Int Paris, France Contact: jsi@ffa.fr
7-10 MetalSteelSaudi 2014 Riyadh, Saudi Arabia www.metalsteelsaudi.com
For more information on steel industry events, visit www.steeltimesint.com January/February 2014
INDUSTRY NEWS
September world crude steel production up 6.1% World crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 133Mt in September 2013, an increase of 6.1% compared to September 2012. The figure for the first nine months of 2013 was 1.1 billion tonnes, a 2.7% increase compared with the same period in 2012. Asia produced 795.1Mt of crude steel in the first three quarters of 2013, an increase of 5.9% over the previous year. The EU produced 123.8Mt of crude steel in the first nine months of 2013, down by -4.2% on the previous year. North America’s crude steel production in the first three quarters of 2013 was
88.9Mt, a decrease of -4.1% compared to the same period of 2012. The C.I.S produced 81.5Mt of crude steel in the first nine months of 2013, down by -3.4%. South America produced 34.8Mt of crude steel production in the first three quarters of 2013, down by 1.2%. China’s crude steel production for September 2013 was 65.4Mt, up by 11%. Elsewhere in Asia, Japan produced 9.3Mt of crude steel in September 2013, an increase of 5.5%, and South Korea’s crude steel production was 5.2 Mt, down by -8.7%. Germany produced 3.6Mt of crude steel in September 2013, an
increase of 1.4% and Italy produced 2.1 Mt of crude steel, down 10.4%. France’s crude steel production was 1.4Mt, up by 7.4% on September 2012. Spain’s production was 1.3Mt, an increase of 5.9% on the previous year. Turkey’s September 2013 production figure for crude steel was 3Mt, down by 1.2% on September 2012. The US produced 7.2Mt of crude steel in September 2013, up by 6.3%. The crude steel capacity utilisation ratio for the 65 countries in September 2013 was 79.3%, 2.1% higher than in September 2012 and 3.4% higher than August 2013.
For a full country by country listing visit: www.worldsteel.org/statistics/crude-steel-production.html
US steel imports drop 17% The American Institute for International Steel (AIIS) claims that steel imports declined by 16.7% in November 2013 when compared with October figures. Richard Chriss, AIIS’s recently appointed executive director, claimed that the fall in steel imports was led by declines in arrivals of semi-finished steel products used by the domestic industry to augment its hot end capacity and OCTG. According to Chriss, “Given the overall subdued condition of the steel market in late 2013, end-ofyear arrivals are sometimes affected by end-of-year inventory taxes due at the state level. Such taxes would clearly have an impact on OCTG arrivals, which are also
affected by pending trade cases.” Comparing 11 months of 2013 with the previous year reveals a drop of 4.4%, according to US Government data. Chriss believes there are signs that in early 2014 the steel market is beginning ‘a more normal seasonal upswing’ than experienced in early 2013. Total imports for November 2013 were 2.583Mt compared with 3.101Mt the previous month. That amounts to a respective 16.7% decrease and a 4.9% decrease when compared with November 2012. For the year-to-date period, imports decreased from 31.009Mt in the first 11 months of 2012 to 29.635Mt for the same period in 2013.
Imported semi-finished products increased by 0.6% in November 2013 compared with the same period in 2012 – from 674kt in 2012 to 678kt last year. For the year-to-date period, imported semi-finished products decreased from 6.963Mt in the first 11 months of 2012 to 6.703Mt for the same period in 2013.
SAIL chairman present for coke ovens start-up CS Verna, chairman of the Steel Authority of India Ltd (SAIL), witnessed the start-up of Coke Ovens Battery No 2 at the Durgapur Steel Plant (DSP) in West Bengal, India. The recently rebuilt ovens are part of a major modernisation and expansion project underway at the plant that will take capacity from a
current 1.60Mt to 2.12Mt of saleable steel. The battery in question accommodates 78 ovens of 23.8 cubic metre volume each and measures 13.59 metres in length by 4.45 metres in height. Improved recovery of coke oven gas is enabled by a ‘double gas collecting mains’ according to
a report by The Times of India, in addition to several other pollution control measures such as leakproof doors and high pressure water jet cleaners. While on-site, Verna also visited a wheel and axle plant, a 1Mt capacity medium structural mill, a 750kt bloom-cum-round-caster and an alloy steels facility. www.steeltimesint.com
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USA STI_30_AIT_0110 1/9/14 11:30 AM Page 1
10 USA UPDATE
The ThyssenKrupp Steel USA buy-out by ArcelorMittal and Nippon Steel is likely to attract the attention of US anti-trust authorities. There is also concern that the acquisition could result in overcapacity and exert pressure on prices. By Manik Mehta*
Calvert buy-out creates big ripples WHILE rumours had been circulating in steel-industry circles, the end-November announcement by steel giant ArcelorMittal concerning the signing of a 50:50 joint venture agreement with Japan’s Nippon Steel & Sumitomo Metal Corp. to purchase the Calvert, Alabama-based ThyssenKrupp Steel USA, created ripples in the US steel industry. According to Lakshmi N. Mittal, ArcelorMittal’s CEO, the acquisition price for the 100% German-owned ThyssenKrupp USA was $1.55 billion. The Calvert steel plant, a state-of-the-art facility, has a 5.3Mt capacity, including hot rolling, cold rolling, coating and finishing lines. The acquisition, accompanied by considerable hype, is subject to regulatory approval, and is expected to be finalised and completed by the middle of 2014. U.S. anti-trust authorities will likely take a detailed look at it. ThyssenKrupp CEO Heinrich Hiesinger was quoted as saying that because of ArcelorMittal’s already dominant market position in the automotive market, the authorities would take their time to look at the transaction. According to New York based analysts, who have closely watched the three-party deal go through, the two joint venture partners, ArcelorMittal and Nippon Steel, have agreed to a six-year arrangement to buy two million tons of slabs each year
from ThyssenKrupp’s Brazilian steel mill ThyssenKrupp CSA. The arrangement also includes an extension option for another three years, while the rest of the slabs will be sourced from ArcelorMittal steel mills in the United States, Brazil and Mexico. The Calvert steel mill acquisition will further strengthen ArcelorMittal’s already strong position in the US automotive sector, considering it is expected to post 15% growth in vehicle production in the coming decade in North America’s automotive market. ArcelorMittal, which supplies some 40% of the steel consumed by the US automotive industry, could increase its automotive market share by another 5 to 8% with the acquisition. A third of the steel produced at the Alabama plant was sold to manufacturers of cars and pick-up trucks. But there was also concern among some US steelmakers that the new acquisition could result in overcapacity and exert pressure on prices. However, some analysts argue that the deal should benefit the entire steel industry, including rival US Steel, considering that ArcelorMittal will endeavour to protect its existing mills in North America and, in effect, see to it that the market is not flooded with excessive production, which could have a devastating effect on pricing. The Alabama plant had been put up for
sale and would have been bought by someone. Also, ArcelorMittal’s behaviour in the US market, according to some local steel industry pundits, has been characterised by discipline and selfrestraint, thus contributing to market stability. ArcelorMittal, according to US analysts, also stands to benefit from supplying the North American energy industry which is expected to see rising demand for energy pipe and tube products, fuelled by increased oil and natural gas exploration and production. The ArcelorMittal-Nippon synergy will also help tap the growing demand, particularly from Japan’s car industry, for ultra-high tensile strength products with good formability. The United Steelworkers, reacting cautiously to the acquisition, said that it was “generally supportive” of the acquisition but did not hide its concerns over the future of the 13,000 unionised workforce at ArcelorMittal’s plants in North America. Meanwhile, steel imports rose in October 2013 over the previous month by 8.4%. According to Richard Chriss, the executive director of the American Institute for International Steel (AIIS), a steel-related association that supports free trade, steel imports jumped in October as pricing for semi-finished steel products, used by the
* USA correspondent January/February 2014
www.steeltimesint.com
USA STI_30_AIT_0110 1/9/14 11:30 AM Page 2
USA UPDATE 11 domestic industry to augment their raw-steel capacity, strengthened in autumn. “While we believe that for the most part the improvement in market conditions reflects re-stocking by service centres and distributors – and not a real improvement in underlying demand – import arrivals reacted predictably during the month in response to improved market conditions,” Chriss said in a statement, adding that the domestic industry appeared to be returning to protectionist actions again, with trade case filings threatened. Total steel imports in October 2013 amounted to 3.058Mt compared to 2.820Mt in September 2013, an 8.4% jump, and a 17.3% increase over October 2012. For the year-to-date (JanuaryOctober) period, imports declined to 27.008Mt, down 4.5% from 28.293Mt in the first 10 months of 2012. “While underlying demand in late 2013 is stronger than in 2012, there is little reason to believe that the current conditions will be sustained unless or until the non-residential construction market returns to health – which most pundits believe will not happen until 2015,” Chriss maintained. Meanwhile, the US International Trade Commission (USITC) recently concluded that the US steel industry had been “materially injured” by non-oriented electrical steel (NOES) – this is coldrolled flat-rolled alloy steel used in machine-tool and electricity generator production – imports from Taiwan and some other countries. This would mean that the enquiry into the case would continue. A USITC statement said that the damage was caused as a result of the NOES sold by Taiwan, China and South Korea in the US market at what it called “less than fair value”, and also because of alleged subsidies provided by the governments of the three countries. Germany, Japan and Sweden were also accused.
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Dumping allegations
There has been an ongoing enquiry by the US Department of Commerce since November into alleged dumping of electrical steel from the six countries, as well as into alleged improper subsidies given by the governments of Taiwan, China and South Korea. A preliminary DoC determination in regard to countervailing duty will be issued by mid-January, while a ruling on anti-dumping duties could be expected in the third week of March 2014. China’s steel pipe supplies have also irked the US steel industry. US senators, in a petition, have urged the DoC to protect steelmakers such as US Steel from illegal Chinese trade practices by maintaining anti-dumping and countervailing duties on Chinese steel pipe imports. The senators’ initiative comes ahead of a DoC ruling concerning duties on oil country tubular products from China. US steelmakers are pinning their hopes on increased use of steel in the construction of bridges and undercarriages, especially because the steel industry has created new designs for making bridges at less cost and enhanced environmentally-friendly fuel tanks using steel forged in mills across Northwest Indiana. Larry Kavanagh, president of the Steel Market Development Institute, has been saying that the SMDI’s R&D efforts had created “some exciting lightweight materials”. He was referring to the efforts of steelmakers in recent years to penetrate new market segments beyond the traditional use of the metal in cars, appliances, buildings and cans, with the offer of new products to bolster demand. The SMDI, which is backed by steelmakers including ArcelorMittal and US Steel, recently produced new designs for steel gas tanks and short-span bridges ranging in size between 20 and 140 feet. Short-span bridges are built mainly over creeks and roads. Steel gas tanks are already in use in Ford Mustang, Chevrolet Volt, the Mercedes-Benz M 450h luxury SUV hybrid vehicle and the Lexus RX 450h advanced hybrid electric crossover vehicle. Steel fuel tanks are also used in advance hybrid vehicles, which require highly-rigid tanks because of the vapour that accumulates in the carbon canister when they are being powered by electricity. ᔢ www.steeltimesint.com
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LA updapte_30_AIT_0110 1/9/14 11:32 AM Page 1
12 LATIN AMERICA UPDATE
Locally produced or imported? That Latin America needs to improve its intra-regional steel trade is undisputed, according to speakers at this year’s Alacero 54 conference. By Germano Mendes de Paula* THE need to improve Latin American intraregional steel trade was a big issue under discussion at Alacero 54 (see conference report on page 33). Keynote speaker Osvaldo Rosales from the United National Economic Commission for Latin America and the Caribbean (UN-ECLAC), discussed regional integration while Benjamin Baptista Filho, Alacero’s president, mentioned the need to enlarge intraregional trade of steel products in the continent. This article analyses the composition of the import steel market in Latin America in recent years. Evolution of steel imports
Fig 1 demonstrates the progress of steel imports in Latin America and the Caribbean based on data from worldsteel and Alacero. The amount of rolled steel product imports rose from 11.6Mt in 2004 to 24.3Mt in 2012 (left axis), implying a 9.97% CAGR. This was a robust expansion rate, bearing in mind that there was a sharp decline in 2009 because of the global financial crisis. Furthermore, Latin America’s share of world steel imports has increased from 3.9% in 2004 to 5.2% in 2008. During the aforementioned economic downturn, the region reduced its share to 5.1%, but rose
to 7.1% in 2012 (see right axis of Fig 1). This considerable figure ratifies the dynamism of Latin America’s steel import market. The decline of intra-regional steel trade
worldsteel releases information about intra- and inter-regional trade in its miniannual statistical report entitled World Steel in Figures. However, this data could not be used for this article because Mexico is considered as part of the North American Free Trade Agreement (NAFTA) and not as integrant of Latin America. For that reason, it was necessary to construct a specific database to tackle the issue. The statistical information underpinning this article was originally organised by Alacero. In fact, it consisted of a very detailed matrix, comprised of 33 products and 106 countries. For the sake of simplicity, after the exclusion of semi-finished products, rolled products were classified into flats, longs, and tubes. The countries were categorised as intra-regional and extra-regional, which was segmented in to NAFTA (USA and Canada), the European Union, China, Asia (excluding China), CIS, and others. Before examining the figures, two
qualifications should be made. First, five small Caribbean countries were excluded, such as Trinidad & Tobago and Aruba, from the definition of Latin America, because of a lack of information. Second, at this moment, information is available only for four years (2004, 2006, 2009 and 2012). Bearing these limitations in mind, the most important empirical evidence of this article is shown in Fig 2. Intra-regional trade accounted for 36% of Latin American steel imports in 2004, 33% in 2006, 28% in 2009 and 15% in 2012. The same trend is verified for each of the categories of products: flats diminished from 33% in 2004 to only 12% in 2012; longs, with respective numbers of 38% and 21%; and tubes, with 46% and 18%. It can be concluded, therefore, that the expansion of steel imports into Latin America regrettably generated more business for outsiders than insiders. Fig 3 demonstrates that wire rod, rebar and seamless had the highest proportion of intra-regional trade in terms of Latin American steel imports in 2012. For these products, the share was higher than 25%. On the opposite side of the spectrum, rail, cold rolled coil and section had the deepest fractions lower than 10%. Winners and losers
32 28 24 20 16 12 8 4 0
2004 2005 2006 2007 2008 2009 2010 2011 2012 Import (Mt) - LHS
8 7 6 5 4 3 2 1 0
50 40 30 20 10 0 2004
Fig 1
Total
Tube
Long
Flat
Share (%) - RHS
2006
2009
2012
Fig 2
NAFTA
Wire rod Rebar Seamless tube HRC Bar Plate Coated Special flat Welded tube Section CRC Rail
0
EU-27 Asia CIS China Others 0 5
10
15
Fig 3
20
25
30
35
10 2012
40
Fig 4
20 2009
30 2006
40 2004
50
The original data was disaggregated by 106 countries and gathered into regions. The USA and Canada were the largest exporter to Latin America, but had reduced their share of inter-regional imports from 42% in 2004 to 31% in 2012. Figures from the European Union were 20% and 15% respectively, while CIS registered an involution from 11% to 5%. On the other side, China has amplified its share from 1% to 19% in only eight years. Other Asian nations have also gained, from 18% to 21%. The winners were quite evident. Summing up, there have been three major tendencies in the Latin American steel import market: a large increase of imports; a strong reduction in intraregional trade; and China as the unquestionable conqueror in terms of extra-regional imports. ᔢ
* Professor in economics, Federal University of Uberlândia, Brazil. E-mail: germano@ufu.br January/February 2014
www.steeltimesint.com
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CHINA STI_30_AIT_0110 1/9/14 11:35 AM Page 1
14 CHINA UPDATE
What future for China’s steel wire trade? The speedy development of China’s steel industry has passed already and the market is currently in surplus. China has no power to decide the price of iron ore on the international market and most domestic mills expect to experience low growth and low profit in the near future. It all points to plenty of challenges and difficulties ahead for the Chinese steel wire industry, argues Shi Lili*
IN recent years, the Chinese steel wire industry has experienced stable growth. The structure, quality and grade of products have been improved and some have reached advanced international levels. Production has picked up by around 10% since the end of 2012 and has soared from 27Mt four years ago to 35Mt today. China could be regarded as a big producer of steel wire, but it still has a long way to go in terms of profitability. Various producers are struggling and are making just enough to survive between the cracks of downstream and upstream. At present, the general situation remains tough and will continue to encounter problems such as surplus production, environmental pressure, strong competition and higher manufacturing costs. Major problems for China’s domestic wire industry
China’s steel wire industry still has a long way to go when compared with the industry in developed countries such as Belgium, Japan, Germany, Britain, the USA, Austria and France. The Chinese industry is technologically and structurally backward and is up against fierce international competition. However, with cheap labour costs in China – and bearing in mind the labour-intensive nature of the steel wire industry – it is attracting significant foreign investment. Bekaert from Belgium has set up several projects in Jiangyin, Shenyang, Shanghai, Weihai, Chongqing and Suzhou. Bekaert claims to be a world market and technology leader in steel wire transformation and coatings. Wire Rope Corporation of America, which claims to be the largest steel wire producer in North America and was established in 1931, set up Wireco Wire Group with WISCORN (Wuhan Jiangbei Iron and Steel Co).
While the entrance of international companies has helped to develop the domestic Chinese market, it has also increased competition. In China the industrial structure for steel wire is inadequate. The immediate need is to elevate its industrial concentration. Bekaert for example, has 96 plants scattered in 29 countries and regions around the world. Its annual production of steel cord alone is over 1Mt and its sales network and agents are spread over 120 countries. The concentration, scale and globalisation of China’s steel wire industry, however, is lagging behind the industry outside of China. Belgium’s Bekaert, for example, has 96 plants scattered over 29 countries and regions. The company produces over 1Mt of steel cord. In China, there tends to be more facilities in the east of the country than in the west. Ownership is pretty complicated too since there is a variety of state-owned businesses, shareholdings, foreign-owned companies, joint ventures, privately owned concerns and so on. In recent years, as competition has intensified, there are still over 1,500 producers remaining although a number of small producers are no longer in business. Not competitive enough
With too many small-scale steel wire producers in China, their geographical spread is unbalanced and low in terms of concentration and they are not competitive enough when compared with their international counterparts. With surplus production capacity and strong competition, the output of domestic premier steel wire producers hovers around 35Mt, which accounts for 60% of total global volume. The variety and quality of products are enough to
satisfy China’s economic demands and only a few items rely upon export business. The steel wire surplus increases on a daily basis. Low-end products still account for a high percentage of China’s steel wire production output. The problem is caused by an abundance of low-end production technology and a lack of knowledge surrounding the development of new technologies – not forgetting an inability to respond quickly to swift changes in market demand. Challenges and opportunities
A Chinese government paper entitled Major Decisions as to Far-reaching and Wide Reforms by Central Government, sets out to transform China into an environmentally friendly society. Punitive measures will be taken against those who are deemed unfriendly towards the environment. The end game is to regulate all those industries that pose a threat to the environment and thereby threaten the healthier direction China is taking. For the steel wire industry, the Chinese government’s plans for a cleaner environment have been both an opportunity and a challenge for growth. Along with the stable development of China’s economy, the overall production capacity of the industry has gradually increased and it has made steps to increase output and expand the number of applications that make use of steel wire. After China’s 12th five-year plan (which runs from 2011-2015) it is important for the Chinese steel wire industry to eliminate inefficient and polluting technologies and develop internationally advanced systems, techniques and products that promote energy efficiency and pay attention to the global ‘green agenda’. ᔢ
* China correspondent January/February 2014
www.steeltimesint.com
worldsteel_30_AIT_0110 1/15/14 4:10 PM Page 2
EXCLUSIVE INTERVIEW 15
China versus the rest of the world? Steel Times International travels to Brussels, headquarters of worldsteel, to interview director general, Dr. Edwin Basson. By Matthew Moggridge* WHEN Dr. Edwin Basson entered the international steel industry, the world was producing around 770Mt/yr of crude steel. Today that figure has increased considerably to over 1.6 billion tonnes of which just under 50% is produced in China. “Just after the crisis in 2008 there was a short period when China was literally 50% of what happened in the world. Today, as the rest of the world begins to grow again, China falls back slightly on a proportional basis, but overall it is still half of what happens both in terms of steel production and also in the use of steel,” Dr. Basson explained. When he started his steel career China produced a little over 100Mt. “In fact, in 2000, before China’s big redevelopment started, it produced 137Mt and that grew to something that is very close to 700Mt today,” he said. “We can never underestimate the absolute sense of purpose that the Chinese steel industry had in the decade between 2000 and 2010,” he added. “They went from less than 20% of global production to something like 50% and this is a tremendous achievement.” The great obsession
In the modern global metals industry, China is the dominant force, the great obsession, a major and, some would argue, daunting presence that is exerting a tremendous influence on how the rest of the industry conducts its business. worldsteel has identified two key risks for the global steel industry going forward. One is the Eurozone crisis and the other is the state of the Chinese economy. Where Europe is concerned, Basson believes that the debt crisis appears to be under control. He has picked up a change in the mindset of European industry leaders and argues that there is a more positive attitude, which is difficult to link to any specific event. “It seems that collectively European industry leaders have come to the point where they’ve said, ‘enough is enough’. They’ve reached the conclusion that the future won’t be as bad as the past and that attitude is bringing some momentum into industrial activity,” he said. * Editor, Steel Times International www.steeltimesint.com
January/February 2014
worldsteel_30_AIT_0110 1/15/14 4:10 PM Page 3
16 EXCLUSIVE INTERVIEW
Europe has turned a corner, but is not about to experience aggressive growth. worldsteel’s economic committee believes 2014 could see growth in the region of 2% on top of 2013, albeit from a low base. “Positive growth from a low base is nothing to shout about, but it’s still positive growth,” said Basson, adding that it’s a huge improvement in the minds of industry leaders. Where China is concerned, worldsteel predicted growth in steel use for 2013 of just 3%, but it now looks as if that figure will be nearer to 6%. Basson points to strong growth in the Chinese automotive industry and claims that the shipping industry – a huge steel consumer – has fallen, but not as far as originally estimated. “The Chinese story seems to be more positive in 2013 than we anticipated. For
Europe and the CIS and capacity shortages in North America and the MENA region – where installed capacity won’t meet domestic demand and, therefore, those nations would have to import steel. worldsteel and other steel associations around the world are prohibited from taking an active and aggressive role in promoting or developing plans that could be seen as reducing or limiting capacity. However, the OECD study was important enough to share with worldsteel members based on the principle that an informed CEO makes better decisions than an uninformed CEO. “If there is excess in your region, you, as a CEO, have to think very clearly about what you are going to do differently to ensure that you generate a proper return on your investment and this is pretty much where we are at the moment,” he said.
“Production and demand in the steel industry are much closer together provided the industry finds ways not to use all of the installed capacity at its disposal,” Basson said. Not using installed capacity has obvious negative financial implications. “To some degree this is what we have seen and it is part of the explanation for why the Chinese industry experienced low EBITDA levels in 2013 when compared to the rest of the world. It’s partly the explanation behind why the rest of the world’s EBITDA levels are not as good as they were five years ago when the industry really experienced peak demand conditions and virtually every single tonne of capacity available to produce steel was in production,” said Basson. While demand is higher overall today, capacity exceeds demand and this, in the views of specific producers, impacts on their EBITDA levels. Some industry observers argue that, in simple terms, a chief reason behind the aluminium industry’s ‘overcapacity’ situation is that producers in the Western world – pre-crisis – viewed China as a huge market for their products, but were stumped by the Chinese going it alone and, to all intents and purposes, becoming self sufficient in terms of aluminium production and demand. Irrational exuberance?
2014 we now think that growth will still be positive in China, but tapering off at around 3%, so still quite healthy growth, but less than in 2013,” he said. At worldsteel’s recent annual conference in Sao Paulo, Brazil, Fernando Pimental, the Brazilian Minister of Development, Industry and Trade, discussed global overcapacity, putting forward figures of between 500Mt to 600Mt, of which 30Mt to 40Mt could be attributed to Europe. Basson quoted a 2012 study by an OECD committee, based on 2011 figures, which found that roughly one third of total capacity was seen to be excess to demand. “Roughly half of this excess was in China, which is logical as China produces half of the world’s steel, but there were also excesses in developed Asia – mainly Japan, Korea and Taiwan – and small excesses in Latin America,” Basson explained. The same study found a small excess in January/February 2014
According to Basson, Chinese overcapacity could be as much as 300Mt. He said press reports have claimed that China is in the process of toning down that figure and that growth in demand over the next three to five years would soak up some of that excess. “The figures I see quoted now hover between 70Mt and 130Mt – which the Chinese Government is intent on reducing,” he said. Comparing the current steel situation with that of the global aluminium industry, Basson believes there are fundamental differences as there is a separate tradable market for aluminium products in the form of financial and futures markets. “The aluminium industry found itself in an excess production situation even though there was no real final demand for the products,” he explained. The steel industry does not have a functioning futures market and, therefore, no warehousing facilities.
For Basson, this was not the case for the steel industry. For a start, the term ‘overcapacity’ has a slightly different meaning. In the world of aluminium it means products stored in LME warehouses around the world waiting for buyers. In the steel industry it means actual production plants that are surplus to requirements. Using a well-known Alan Greenspan phrase, Basson blames excess production capacity on a state of ‘irrational exuberance’ at a time when there were vibrant growth conditions in the global marketplace and both Chinese and nonChinese alike were busy cashing in on future steel demand by building new capacity. The markets collapsed after 2008 just as these new production plants came on stream and it was the non-Chinese world that reacted faster and called a halt to many investments. That China is virtually self-sufficient when it comes to both aluminium and steel is undeniable. In steel terms, Chinese exports have hovered between 30Mt and 50Mt. According to Basson, the Chinese have an internal target, which says that no more than 5% of internal production will be exported. “Overall, they tend to stick to that,” he said. While delegates to various global metals industry conferences would be forgiven for thinking that China is regarded as ‘the big, www.steeltimesint.com
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18 EXCLUSIVE INTERVIEW
“My sense is that there is still a lot of feeling that China is the root of all evil, but much of this is political speak in preparation for potential trade cases and, therefore, they create a certain atmosphere by making use of certain statements”
bad wolf’, Basson argues the opposing view: that it has a leadership role to play within the steel industry. “My sense is that there is still a lot of feeling that China is the root of all evil, but much of this is political speak in preparation for potential trade cases and, therefore, they create a certain atmosphere by making use of certain statements. At the same time, there is a growing realisation that China is a very significant player on the world steel market and will continue to be an important player even January/February 2014
10 years from now,” he argued. “We have a standing request from our members to do everything possible to interface with Chinese steel producers and continue to build a strong relationship there,” said Basson, adding that China is probably better placed than most to do something about excess capacity. “If the speed with which they have been able to build plants is anything to go by, then clearly there must be similar dedication to reduce facilities,” he said. Greater two-way communication is
needed between Chinese and non-Chinese steelmakers, believes Basson. There is a real need for greater understanding of what ‘the other side’ is saying and this need has grown considerably over the past two years. The Chinese are much more outspoken about their need to understand how to run their businesses more successfully and how to increase profitability. “They are reaching out for communication with the rest of the world and I think that is positive and will help us to address some of these issues in a more www.steeltimesint.com
worldsteel_30_AIT_0110 1/15/14 4:10 PM Page 5
EXCLUSIVE INTERVIEW 19
efficient way going forward,” he said, adding that the Chinese are only too aware that their future fortunes are inextricably linked to those of the rest of the steel industry and this drives their willingness to communicate. Learning from the Chinese
The West can learn a great deal from the Chinese. “They [the Chinese] can build technological installations in half the time or speed that the rest of the world can do it. At the same time, in Europe and the USA, there’s a 20-year history of driving relentless efficiencies, driven by the fact that this has always been an industry where it is tough to make a profit and, therefore, you have to drive continuous improvement to ensure that every year you can improve operational efficiency,” he said, explaining how a key function of worldsteel is to provide sensible benchmarking mechanisms and sharing advances in technology. Where green steel production in China is concerned, there has been a ramping up of environmental awareness following extended periods of smog alerts in Beijing
provincially owned companies are required to operate as standalone concerns generating their own funds. The provincially owned businesses account for an additional 12% of China’s steel production. In other words, just less than 50% of China’s steel production is in some way controlled by the state or provincial governments; the rest is privately owned. Any environmental policy handed down by the Chinese government can directly influence 35% of state-owned steel capacity and possibly a further 12% of capacity owned by provincial governments. The remaining 50% are, according to Basson, ‘intensely private’ and tend to be smaller, non-consolidated, localised businesses that are not necessarily in tune with international trends and are happy supplying a limited product range to a restricted customer base in a specific geographical area. “There’s no incentive for these owners to give up their capacities and their livelihood and this is the challenge in terms of bringing about change in China,” explained Basson, adding that when new licensing requirements for Chinese steel
for almost 50% of steel production and 50% of steel use. “About two years ago, the Chinese economy reached the inflexion point on its growth path where it was still growing, but at a slower pace than in the past. This is normally a first indication that a turning point has been reached. The big question concerning China is: when will it reach its peak – assuming it has already reached the inflexion point? It is currently using and producing close to 700Mt/year, in crude steel terms, and the current wisdom points to 2018 in worldsteel’s base case analysis, but could stretch to 2024 – or thereabouts – in a more positive case analysis. “One of the key issues to be addressed in the next year or two is going to be the fact that there is slower growth in China. This will be due to capacity. Why would the Chinese want to build new capacity if they are already the largest growth economy in steel terms and are approaching a peak in performance? Thankfully it seems that this point has been well and truly grasped and that they are doing something about it. Precisely what they will do, nobody knows at the moment, but it seems to be a focus, which I think is good,” Basson said. Pedestrian growth expected
Next month, we publish part two of Steel Times International’s exclusive interview with worldsteel’s director general, Dr. Edwin Basson. and Shanghai. “The Chinese government has been very aware of this and has introduced stringent environmental rules that will eventually impact on licensing requirements for steel producers,” he said. In China there are four, large steel producing companies owned by the government. These four companies are responsible for 35% of China’s total production. The next level down, according to Basson, is steel producing companies owned by China’s provincial governments. Both state-owned and www.steeltimesint.com
producers do take effect, it is the smaller, private concerns that are likely to lose out. “And I think this is one of the routes the Chinese government will follow to bring the excess capacity issue to a head and address the question of environmental pollution,” he said. In the long term, the industry probably has scope to double today’s use levels – assuming there is going to be a stable world population of between 9 to 9.5 billion. In the short term, however, the big challenge ahead is China, which accounts
The second key issue is how, in the light of a slowing Chinese economy, can the steel industry in the rest of the world continue to flourish? It is generally assumed unlikely that, in the short term, India, the Middle East or Latin America will make great leaps forward and become the next strong and growing global economies. “This implies that we are probably going to experience fairly pedestrian growth rates of around 2-3% going forward, which is gratifying in the sense that it is positive growth, but not so gratifying in the sense that it is lower than inflation will be in many other countries in the world. So, the second big challenge we have to address is the question of profitability, which is under pressure at the moment. The jury is out in terms of what to do and how to do it in a slow-growing, transparent marketplace where excess capacity is available and virtually everyone pays the same raw material prices to the same three large suppliers,” Basson said. Driving efficiencies internally will make a big contribution to profitability, but at the same time Basson argues that the industry must continue to make progress on the environmental front. “In other words, continue to make investments that will help us use less energy, pump less carbon into the atmosphere and help maintain clean water levels in our run-off waters and so forth,” he concluded. ᔢ January/February 2014
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20 ANALYSIS & TESTING
The importance of good R&D Attempting to improve the mechanical properties of steel, in order to produce better in-service performance or to enable the use of steel in new and onerous applications, is a key aim for metallurgists. This article aims to introduce the basic concepts, terminology and influences that play key roles. By Keith Walker* The second strength level commonly reported is tensile strength. This is a rather confusing name and, as shown in Fig 1, it is the maximum load that a component will bear before failure (the end of the line on the graph). Note the use of the word ‘component’, rather than steel. While the tensile strength is a useful concept for design purposes, it arises because the graph in Fig 1 is a ‘stress - elongation’ curve for a component, in this case a tensile test piece. It is critically different from a true ‘stress-strain’ curve for steel because the stress is given as the applied load divided by the original cross-sectional area of the test piece. In reality, the test piece narrows as it elongates (‘necking’), and strictly speaking the stress is not being measured correctly, and is, in fact, higher. Why does this matter? Fig 2 shows a true stress-strain curve for steel. It can be
Stress
applications where permanent plastic deformation is desirable – we tend to want to keep steel in the elastic region. The yielding behaviour arises due to trillions of atomic scale defects in the crystals in the steel, which start to move, allowing a change in shape of the steel without it breaking. These are called dislocations. To produce higher yield strength, the task is to stop them moving until a higher stress is applied. Metallurgists use a number of approaches, often in combination, to ‘pin’ dislocations. Smaller grain size, a high carbon content (up to a limit of around 0.8%), micro-alloying and heat-treatment are used to produce steels with up to 2000MPa yield strength, which can be compared to around 300MPa for ordinary structural steels. For special steels, higher levels can be achieved using increasing
Tensile stress Plastic region Yield stress
Stress
ONE of the most basic (at first sight) concepts is that of strength. Many people believe they know intuitively what strength means, but most do not. A commonlyused expression is “stronger than steel”, which is a meaningless statement, especially given the wide range of strength levels available in different grades. Strength is concerned with the way steel behaves in response to an applied stress. The load or force divided by the crosssectional area is known as stress and is equivalent to pressure. A pulling (or tensile) stress tends to elongate the steel and the elongation is called the strain. Fig 1 shows how this can be represented as a graph and the graph shows how steel under tensile testing elongates as the stress increases. In a tensile testing machine, a specifically shaped test piece is made and pulled apart. It is important to notice that at first, the applied stress causes a strain directly proportional to it – it is a straight line. This is the elastic deformation region, and if the stress is removed, the elongation will completely disappear. Then the graph becomes curved and the increasing stress causes a greater strain than in the elastic region. The steel is then said to be undergoing plastic deformation and has ‘yielded’. The stress at which the steel changes from elastic to plastic deformation is called the yield strength and is a property that is tested and reported for almost all grades of steel. Once the steel has yielded, if the stress is removed there will be some permanent elongation. The slope of the elastic region straight line is the elastic modulus of steel and is 210GPa. It represents the stiffness of steel. It is critical to understand that this does not change if the steel has a higher yield strength. What this means is that making steel stronger does not make it harder to bend, only harder to bend it permanently. This is a very common area of misunderstanding, but it is the reason why very high strength steel is not worthwhile for making buildings with very thin structural sections to save weight - they are simply not rigid enough, and the use of such steels is confined to products where rigidity is not usually an issue (for example, wire).
Elastic region
Plastic region Yield stress
Elastic region
Strain
Strain
Fig 1 Stress-strain curve for tensile test. Note that the stress is load divided by original cross-sectional area in this case
Fig 2 True stress-strain curve for steel. Stress is the load divided by the instantaneous cross sectional area
seen, critically, that the apparent weakening of the steel before failure that is implied in Fig 1 does not actually happen. In fact, steel continues to get stronger until the point at which it breaks, a process called ‘work hardening’. This is quite a vital difference in terms of understanding how steel behaves under increasing stress, especially in terms of cold forming processes like pressing car bodies. Having understood what strength means, it is useful to consider why steel undergoes the yielding behaviour, and, therefore, what can be done to increase its yield strength. Yield strength is usually the key concern since there are not many
amounts of alloys, especially for tool steels. For tool steels, it is often the hardness which is measured and is important. Hardness, however, represents the steel's resistance to indentation, and this is very closely related to yield strength. For most practical purposes, strength and hardness can be regarded as the same thing. There are many tests for hardness (Brinell, Vickers and Rockwell being the most common) but they all work by making an indentation using a known load and then measuring the size of the indentation. Some other tests measure the rebound of a hard steel ball when bounced against the steel with a known energy.
*Steel consultant. Email keith.walker@steelfolk.co.uk January/February 2014
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22 ANALYSIS & TESTING
Steel with a high level of strength or hardness, however, may be brittle. This means it has a low level of toughness, another term often confused with strength. Toughness is the steel's ability to absorb energy in the plastic region and is associated with impact rather than loading - a sudden, high strain rate blow. This is related to the area under the graph in Fig 2. In fact, the tendency for steel, which is high strength, to have low toughness is one of the major problems for metallurgists - how to make steel which is strong and tough at the same time. Many readers will have experience of how a hard drill bit will break if subjected to sudden impact. One way of making steel very hard is to quench it from a high temperature, the sudden cooling leading to a hard crystal structure called martensite, but the steel is then usually tempered at a lower temperature to restore some toughness at the expense of some strength. Toughness
applications. The mechanism for this transformation is complex and related to a reduction in the crystal slip planes that permit dislocation movement. The effect reduces toughness to very low levels and so service temperatures for steel components need to be known so that adequate toughness can be assured. In fact, the only single approach that results in good toughness and good strength at the same time is to reduce the grain size of the steel, one reason for many grades to be 'fine-grained'. This can be achieved through alloying and through controlled rolling processes. However, a fine grain size can have a detrimental effect if steel is used at elevated temperatures, such as in engines; since it increases the likelihood of an effect know as ‘creep’. This is where the elongation of the steel is greater than expected from a stress-strain test under a given stress in service. Creep can take a
Microstructure of hot-rolled plain carbon steel. Reducing the grain size improves both toughness and strength.
is measured using standardised test pieces with a specific notch in them, which are then subjected to an impact of known energy (often a pendulum hammer), and the amount of energy absorbed when the test piece breaks is reported in Joule. Steel specifications will give a minimum value and usually at least three tests are undertaken and the average reported. One feature of steel is that its toughness depends on temperature, and not in a linear way. Therefore, when undertaking impact testing, the temperature of the test piece is stipulated. For some applications (for example LPG ships and offshore) this may be as low as -70C. Special alloying is required to achieve good toughness at such low temperatures, often needing relatively high levels of nickel to be added, making the steel expensive. These precautions are necessary because steel undergoes a sudden drop in toughness over a very short temperature range, a socalled ‘ductile to brittle transformation’. For ordinary grades of steel, this can be as high as 0C, clearly a temperature often occurring in service in outdoor January/February 2014
long time to happen, so the problem is often not apparent from the outset. Steel grades for high temperature service will be subject to extensive creep testing, which involves placing a test piece under a static load at the service temperature and holding it for (sometimes) months. The mechanism of creep is associated with grain boundary movements, and so the fewer grains there are the lesser the effect. The aim is for a large grain size, making it necessary to obtain adequate strength and toughness through other means. In some applications, resistance to fatigue is required. Fatigue is a process where steel can crack and fail at an applied stress far lower than that required to break it during a tensile test, but the stress must be cyclical. It is, therefore, most common for rotating devices, but can also occur in reciprocating springs (valve springs), where components are subject to vibration and even in steel tyre reinforcement due to repeated bending as the tyre rotates. Fatigue resistance is measured using a standardised rotating test piece under a given stress, and the number of cycles
required to cause failure is reported. At higher applied stress, fewer cycles are required as may be expected, but steel has a fatigue-limiting stress below which fatigue does not occur, and it varies with the grade. This is in contrast to metals, such as aluminium, which has no fatiguelimiting stress. One of the most critical precautions required in steel that needs high fatigue resistance is a low-level of socalled inclusions. These are non-metallic particles that are embedded in the steel throughout its microstructure and may be a consequence of contamination during steel making or may arise by precipitation during solidification. Angular shaped inclusions are usually the most detrimental, but others can cause problems. The issue is that, naturally, some inclusions must outcrop at the surface of the steel, providing a site for more likely crack initiation. Since careful control of the steelmaking process is necessary, requiring a good deal of know-how rather than the correct equipment, fatigue resistance can be difficult to achieve and steelmakers compete on the quality of their products. Since the rate of growth of any crack initiated is related to the toughness of the steel, a good level is aimed for. Fatigue is insidious in that there is little deformation at the surface of the crack, making it difficult to detect, but the crack can grow until a brittle failure occurs suddenly. For this reason it can be a major concern. For many manufacturing processes that use steel, its formability properties are very important. This is the ease with which steel can be deformed at room temperature into whatever shape is required without splitting, breaking or cracking, and most often relates to strip and rod products. Often, however, there is an obvious need to ensure that the properties of the final component are adequate, such that very low-strength steel with high toughness may not be suitable. Examples are pressing of car bodies and drawing of wire, but a critical application is deep drawing of beverage cans, which is now achieved with a single operation, removing the need for the side weld seam and separate bottom, which featured historically. Again, a low level of inclusions is required to prevent splitting, and steelmakers use a number of different steel microstructures to achieve good formability. A test known as a hole expansion test can be used to measure formability, where a standard hole in the steel is expanded with a mandrel to ascertain whether any cracking occurs. Through good R&D and further development of testing, steel continues apace to meet new demands for mechanical properties such that at any time, around 30% of grades being used have been developed during only the last five years. ᔢ www.steeltimesint.com
quark NDC and CRU_Layout 4 17/01/2014 08:29 Page 1
2014
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CO PROFILE_30_AIT_0110 1/15/14 4:12 PM Page 1
24 COMPANY PROFILE
Danieli – still growing and thriving Danieli has grown to 60 companies within its plantmaking division, including nine in SE Asia, nine in the Americas and two in the Middle East. Nearly half of all orders in recent years have been from the Far East. By Tim Smith * HEADQUARTERED in Northern Italy, plant builder Danieli & C reported the results of its financial year to June 2013 at an annual meeting of shareholders, financiers and local dignitaries, held at its engineering works in Buttrio, Udine. While revenue was down 10% at €2782.3M compared to €3081.1M in 2012, and EBITDA was down 8% at €277.5M (€303.0M in 2012), the net worth of the company increased 10.4% to €1427.266M. Chairman and CEO, Gianpietro Benedetti, said the company had met its target in terms of budget and market share and the investment plan embarked on two years ago had been completed. Also, the second half of the year had seen some recovery in the European market, which had also helped Danieli’s steelmaking division, Acciaierie Bertoli Safau (ABS), which makes special steel long products, to improve its lacklustre results. Mr Benedetti also announced the Group’s ‘Vision 2018’ strategic investment plan, which entails investments of €300350M in each of its plant building and steelmaking segments. At the current count, Danieli has 21 plant building or service companies covering the complete portfolio of integrated and minimill steelmaking and, increasingly, the aluminium industry. One of the main investments, just completed, has been the building of a new research centre just across the road from the company’s main workshops – linked by a purpose-built pedestrian underpass. Other investments included an expansion of the workshops, the opening of additional overseas workshops and engineering offices in India and Russia and a growth in the company’s academy to train junior employees and refresh older ones. Continuing its expansion by acquisition, Danieli purchased Riverside in the USA
Company
Established
Location
Activity
Danieli Centro Metallics
1987
Italy
Ore processing and direct reduction plants
Danieli Engineering
1964
Italy
Turnkey plants and systems engineering
Danieli Automation
1969
Italy, Sweden, Russia, USA
Process control systems
Danieli Corus IJmuiden
1977
The Netherlands
Integrated steelmaking plants
Danieli Centro Recycling
1988
Italy, UK, France, Germany
Steel recycling plant
Danieli Centro Met
1914
Italy, Austria
Electric steelmaking and oxygen converters
Danieli Davy Distington
1941
UK, Italy
Slab and bloom casters
Danieli Wean United
1901
Italy and USA
Flat product casting, rolling and processing
Danieli Kohler
1959
USA
Air wiping equipment for metal coating
Danieli Fröhling
1947
Germany
Speciality mills and strip finishing lines
Danieli Morgårdshammar
1856
Sweden
Long product rolling mills
Danieli Centro Tube
2004
Italy
Seamless pipe plants
Danieli W+K
1968
Germany
Longitudinal and spiral welded pipe plants
Danieli Centro Maskin
1953
Italy, Sweden
Conditioning, drawing, finishing lines
Danieli Rotelec
1977
France
EMS and induction heating systems
Danieli Breda
1950
Italy
Extrusion and forging plants
Danieli Centro Combustion
1981
Italy
Reheating systems
Danieli Environment
1973
Italy
Ecological systems
Danieli Centro Cranes
1958
Italy
Cranes for the metals industry
Danieli Construction
2003
Italy; Thailand
Turnkey construction, erection and systems engineering
Danieli Service
1961
Italy, Austria, China, India, Russia
Technical service and spare parts
Table 1 Danieli Plant Division in 2013
during 2013, a company specialising in the building of scrap fragmentation machinery. Danieli increased the numbers directly employed by 9.0% during the year to 10,944. Company structure
Danieli’s origins date back to 1914 when two brothers, Mario and Timo Danieli, founded the Angelini Steelworks in Brescia, Italy. It was one of the first Italian companies to use electric arc furnaces in steelmaking. In 1929 part of the Angelini Steelworks was transferred to Buttrio. In those days the company manufactured tools for forging plants and auxiliary machines for rolling mills. In 1955 Luigi Danieli took over the family business, which at that time employed 50 people, and started designing and manufacturing equipment for the steel industry.
Table 1 provides an overview of the company today which currently has 21 groups supplying equipment for the metals industry. The dates when each was established are included, some of which pre-date Danieli’s involvement as sole or majority shareholder. In total, Danieli has 60 companies within its plantmaking division including nine in SE Asia, nine in the Americas and two in the Middle East. In addition it has six finance companies and six companies within its steelmaking division. All report to the company’s headquarters, Danieli & C Officine Meccaniche SPA located in Buttrio. The board of directors consists of Gianpietro Benedetti as chairman and CEO, Carla de Colle as vice chair, Franco Alzetta as managing director and Giacomo Maresschi Danieli and Augusto Clerici Bagozzi as directors.
* Consultant editor, Steel Times International
Danieli’s workshops in Buttrio, Northern Italy
January/February 2014
www.steeltimesint.com
CO PROFILE_30_AIT_0110 1/15/14 4:13 PM Page 2
COMPANY PROFILE 25
& Others 20% Steelmaking 6%
Long products 21%
dd le ric Eas a8 t % Far East 47%
Steel meltshops 19%
Europe 28%
Flat products 21%
Fig 1 Orders in place for ferrous plant by type FY 2012-13
Steelmaking division
The steelmaking division consists of two electric arc special steelmaking plants, one near Buttrio and the other in Sisak, Croatia; a cold finishing bars plant near Buttrio, and a research and development centre in Metz, France, as well as sales and support offices in Germany and Sweden. Steelmaking results were down on 2012 with net revenue at €686.432M, down 23.0% on 2011/12 and net profit saw a 69.6% drop to €10.567M. ABS in Italy produced close to 1Mt of steel in FY 2012/13 while the Croatia plant has had investments to bring its capacity to 300-350kt/y. Activities
The bulk of orders come from the iron and steel industry, but Danieli has been increasing its activities in aluminium production plant in recent years with the Fröhling Group being complemented by the acquisition of UK-based flat product rolling specialist, Innoval Technologies, in 2012. During the financial year to June 2013, Danieli was awarded eight major orders for aluminium processing equipment and oversaw four start-ups. Of these 12 orders, five were at locations in the Far East, five in Europe and one each in the Americas and Middle East. In contrast, new orders for ferrous equipment amounted to 56 and there were 52 start-ups during the year. Of the order backlog for ferrous plant, 34% was for long product equipment, 21% for flat products and 19% for steel meltshops (Fig 1). The geographic distribution of orders was
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Americas 17%
Mi Af
Fig 2 Number of ferrous orders by region (backlog & start-ups) FY 2012-13
dominated by the Far East, which accounted for 47% of total orders (backlog & start-ups) followed by Europe (28%) (Fig 2). In terms of revenue from ferrous plant equipment, 24.7% came from Europe and Russia (compared with 41.6% of total revenues) in FY 2012-13 compared to the FY ended June 30, 2012, when that region accounted for 29% of steelmaking revenues and 46.4% of the total. Outlook
Danieli believes that worldwide steel consumption will remain strong over the next few years, with credit markets gradually reopening. As a result there is still solid interest in investing in new, innovative plant to serve geographic areas where major manufacturers are not yet operating. There is increasing need to ensure greater flexibility and more efficient use of available resources. The metal industry plays a strategic role for growth and employment in manufacturing in general, which has led to greater interest in maintaining and developing the steel and aluminium industries even in countries with mature economies. Demand has shown appreciable growth in the BRIC countries, the USA, the Middle East and North Africa for integrated mid-size plant with highquality products needed for mechanical engineering, car making and infrastructure. The prospect of using new technologies to improve energy efficiency in production plant and achieve environmentally friendly production through the efficient implementation of recycling principles is encouraging European and Russian
operators, too, to make fresh investments in the efficiency of production and reduction of emissions and other forms of pollution. Maintenance by the Danieli Group of a substantial order book confirms the solidity of demand and an inclination to invest in quality plant that affords cutting-edge production techniques. The complexity and slowness in identifying and co-ordinating suitable instruments to restart the economy by the governments of major industrialised countries is bringing about only a slight improvement in the economic recovery for the manufacturing, mechanical engineering and steelmaking industries, still burdened by a policy that is not very accommodating for investment. However, steel consumption is expected to remain strong in 2013 and moderate growth is expected in the BRIC countries as well as stable consumption in the USA and Japan, but still stagnant in the EU. Given this scenario, the steelmaking segment of Danieli (ABS) is expected to perform satisfactorily in 2013/2014 with an efficient production mix and higher production volumes. For the plant making segment, revenues and margins are expected to hold steady in 2013/2014, thanks to better management of operating costs and more careful planning of plant start-ups. The Group continues to pursue efficiency objectives such as increased productivity, reduced structural costs, further innovation and improved customer service. Together with substantial investment in structures, facilities and people in Southeast Asia, these efforts are aimed to keep the Group highly competitive in the global market.
January/February 2014
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26 COMPANY PROFILE
Danieli Thailand, Rayong Industrial Area
Centro Combustion, Furnaces Private Ltd, India
Danieli Metallurgical, Equipment, (Beijing) Co Ltd, China
Design and plant engineering offices in Buttrio, Italy
Capital expenditure and R&D
Safety
Major investments during FY 2012/13 were: • €38.5M for new plant in the steelmaking segment at ABS to provide greater flexibility and efficiency in steel production by expanding the range of products offered with improvements to finish and quality, together with the active environmental management of all phases of production. • €129.5M for new machine tools installed in workshops in India, Russia, China and Thailand, with the objective of producing equipment with greater efficiency by expanding the market for sales of plant and equipment. Also, at the Buttrio workshops, the replacement of older machinery, which has been in use for more than 15 years.
The company policy for the prevention of accidents and injuries has achieved positive results through the years; in particular, in the recent 12-month period, which saw a significant drop both in the frequency and severity of injuries. In the past three-year period, Danieli Group’s position in relation to injuries averaged 20.48; a good result compared to the 2008/2010 INAIL (Istituto Nazionale per l’Assicurazione contro gli Infortuni sul Lavoro) average index of 36.2. In the same three-year period, ABS had an average position of 17.92, an excellent result compared to the 2011 Federacciai figure, of 35.1. In particular, the injury frequency and severity indicators show a significant reduction, as a result of the introduction of an integrated management system, in compliance with OHSAS 18001/07 and through both personnel training/ information initiatives, and safety-enhancing work carried out on plants and work processes. In the three-year period, the Group’s average position in relation to injury severity was 0.65, a
good result compared to 2.52, the 2008/2010 INAIL average. In the same period, ABS had an average severity of 0.53, a good result compared to the 2011 Federacciai figure, of 1.12. Groupwise, only 4% of absences from work were due to work-related injuries.
During the year, the Group moved ahead with research programmes initiated in previous years, with a view to providing customers with new-technology plants capable of better quality of output and lower investment and production costs. These efforts involved expenditure of approximately €40M for direct and indirect research activities, with more than €300M in innovative job orders managed during the year.
Workforce
Two-thirds of the Group workforce of 10,944 are under the age of 40, with 32% being below 30 years of age. Graduates make up 33% of the total workforce and 43% of the remainder are trained to High School level. In-house training has run 715 courses totalling 150,520 hours aimed foremost at developing an understanding of the Danieli enterprise by sharing all general technical knowledge. This focus is complemented by carefully targeted investments, aimed at developing technical and specialist competencies, and by initiatives to complete professional profiles with basic managerial components that cut across the organisation. ᔢ Contact www.danieli.com
Danieli Middle East, for Engineering and Services Llc, Egypt
January/February 2014
www.steeltimesint.com
Pagine 2013 A3 esecutivi 2013_08_08_qxd8_A3 esecutivi 14/01/14 10.12 Pagina 25
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ALACERO_30_AIT_0110 1/9/14 3:25 PM Page 1
30 CONFERENCE REPORT
Short-term moderate growth The 54th Alacero Conference, held in mid-November 2013 in Peru, concluded that the world steel industry will witness moderate growth over the coming years – and that Latin America will not be an exception to that rule. By Germano Mendes de Paula*
Irene Mia, from the Economist Intelligence Unit (EIU), discussed the world macroeconomic perspective and initially emphasised the global risks, one being derived from the monetary policies of the developed countries. The intensity of printing money by the Federal Reserve Bank has been unprecedented. With zero interest rates in most developed nations, capital has flooded emerging markets at an unparalleled rate. According to Mia, investors began to lose confidence in emerging markets in early 2013 when GDP growth sank, but the trend accelerated after the Federal Reserve Bank announced a possible interruption of its “quantitative easing” policy, causing investors to be more selective. Volatility might be high for some time as investors re-assess their positions. Emerging economies with large current account and/or fiscal deficits with good international connections through trade and investment tend to be more vulnerable to rising interest rates. The EIU estimates that combined current accounts and fiscal deficits as a percentage of GDP vary from 10.9% (in South Africa) to 3.5% in Thailand (Fig 1). Brazil – and especially Mexico – are in comparatively good shape according to this metric. Where economic recovery is concerned, Mia stressed that worldwide confidence
South Africa
-10.9
India
-9.9
Turkey
-8.1
Poland
-5.4
Indonesia
-4.8
Brazil
-4.8
Israel
-3.9
Mexico
-3.6
Thailand
-3.5
Fig 1 Combined current account and fiscal deficits as percentage of GDP 300
600
Crude oil
400
200
Industrial raw materials 300
150
Food and beverages
200
100
100
50
0
0 2000
2002
2004
2006
2008
2010
2012
2014
2016
Fig 2 Unit price indexes for crude oil, industrial raw materials and food and beverages, 2000=100. Source: EIU. Crude oil on left-hand axis; industrials and food on the right-hand axis
Poverty headcount, per cent
250
500
price indexes for crude oil, industrial raw materials, and food and beverages. It can be observed that prices for industrial raw materials and food were multiplied 2.5 times between 2000 and 2012 (right axis) and crude oil, by 4.5 times (left axis). The EIU believes that, over the coming years, commodity prices will not increase as much as in the past decade. In fact, it expects that prices will remain static despite the boom in infrastructure in several emerging markets, including India. For 2016, the EIU forecasts that industrial raw materials will enlarge by 15% in comparison with 2012, but that crude oil and food prices will drop by 5%. The expectations of stable (or even lower) commodity prices should lead to other sources of growth for emerging countries. Latin American economy
According to EIU, Latin America will experience moderate GDP growth of 2.9% in 2013 and 3.7% in the period 20142017. This moderate performance will be underpinned by various factors, including: a) stable growth with relatively contained inflation; b) sound macro-economic policies; c) strong foreign reserves coverage; d) sounder and healthier financial systems; e) abundance of strategic natural resources and diversified export markets and products, especially for the bigger economies; e) record Foreign Direct Investment (FDI) inflows; f) favourable demographics with a growing middle class (supported by strong credit growth) feeding into increasingly important domestic markets.
50
11,000
45
10,500
40
10,000
35
9,500
30
9,000
25
8,500
20
8,000
15 10 1995
1997
1999
Extreme poverty
2001
2003
Moderate poverty
2005
2007
GDP per capita, PPP,
Global economy
levels (measured by the Purchasing Managers’ Index or PMI) have recovered, even in Europe. In the USA, the unemployment rate has been maintained at around 7.3% and there has been an increase in the number of new houses being built and cars being bought. In addition, non-conventional energy sources (shale gas) have reduced US dependence on imported energy. Mia expects US GDP to expand 1.6% in 2013 and 2.6% in 2014. She declared that the worst is over in the Eurozone, but that there are many hurdles (high public debt, the negative social impact derived from austerity and higher labour costs) still to be overcome. For the emerging countries, the EIU has highlighted various headwinds, such as a drop in global demand, reduced world trade growth, the end of the liquidity boom and the non-advancement of structural reforms, not forgetting less favourable commodity prices, the latter being important for emerging nations in general, especially in Latin America. Fig 2 demonstrates the evolution of unit
constant 2005 international dollar
THE Alacero conference in Peru is widely regarded as a key forum for the Latin American steel industry, attracting senior executives from around the world.
7,500 2009 2010
GDP per capita PPP (constant 2005 international dollar)
Fig 3 GDP per capita and poverty in Latin America, 1995-2010. Source: World Bank
* Professor in Economics, Federal University of Uberlândia, Brazil January/February 2014
www.steeltimesint.com
ALACERO_30_AIT_0110 1/9/14 3:26 PM Page 2
CONFERENCE REPORT 31 50
Conservative case
45 40
Material mix (in Mt) 80
35 Percentage of population
80 66
30
58 0 2 1
60
25 20
40
46 1 1
3 2
40
33
10
20
5 2000
1995
2010
2005
Year
Vulnerable (US$4-US$10 a day) Poor (US$0-US$4 a day) Middle class (US$10-US$50 a day)
46 1 1
66 2 2 6
60
40
33
40
22 2020
2012 Composites
Other plastics
30
16
21
16
0 2012
2030
63
58 6 1
7 2 13
31 30
20
20
30
46 1 1 14
14
0
0
58 3 1
60
44
Material mix (in Mt) 80
Material mix (in Mt)
1
14
15
Accelerated case
Base case
2020
Aluminium High strength steel
30 20
12
2020
2030
0 2012
2030
Conv. steel
Fig 4 Middle class and poverty in Latin America, 1995-2009 (%). Source: World Bank Fig 5 Automotive material mix, 2012-2030 (Mt) 8% CAGR (%)
Mt 3,000 2,541
2,500
2,151 2,000 1,500 1,000 500
1,685 1,675 1,413 1,289 1,101 988
1,814 1,683 1,406 1,300 752
591 408
511
2011
2016
2,891
IO supply1
2,455
IO demand
2,104 1,969 1,604 1,512 892 593
2011-16 2016-212011-21 7.5%
2.6%
5.0%
3.7%
2.7%
3.2%
4%
Crude steel prod.
3.9%
3.0%
3.5%
2%
Finished steel cons.
4.1%
3.2%
3.7%
0%
Iron production
3.6%
2.7%
3.2%
BOF production
3.9%
3.1%
3.5%
Net scrap availability
4.1%
3.5%
3.8%
EAF production
4.5%
3.0%
3.87%
Global ex China
China
6%
-2%
11
12
13
14
15
16
17
18
Fig 7 Crude steel production annual growth, China and rest of world, 2011-2018 (%). Source CRU
Fig 6 (left) Steel and input production and consumption, 2011-2021 (Mt and %). Source:
0 2001
2021
BCG. Iron ore supply, starting 2010, considers existing mines, projects in construction and feasible projects
The World Bank’s Augusto De la Torre analysed the phenomenon of a so-called “new middle class” in Latin America. The right axis of Fig 3 shows the evolution of per capita GDP, in purchasing power parity (PPP) terms, for the region, for the period 1995-2010. From 1995 to 2003, income per inhabitant expanded marginally from $8,000 to $8,500, but afterwards it jumped to $10,500. Furthermore, the proportion of moderate and extreme poverty remained fairly constant until 2003 and, afterwards, decreased from 45% to 30% and from 28% to 15%, respectively (left axis of Fig 3). Based on a sample of 15 Latin American countries, the World Bank has verified that the Gini co-efficient, which measures income inequality, diminished in 12 nations during the period 2000-2010. The only exceptions were Costa Rica, Uruguay and Honduras. The World Bank defined the middle class in Latin America as the people with per capita income between $10 and $50 per day (in PPP terms). In addition, it entitled “vulnerable” as the population with per capita income of between $4 and $10 daily. The latter is understood as a fraction of the residents that are likely to return to poverty. Fig 4 shows that the percentage of poor people in the population in the region has decreased from 45% in 1995 to 30% in 2009. Meanwhile, the ratio of vulnerable people has increased from 33% to 38% and the middle class from 20% to 30%, respectively. The World Bank www.steeltimesint.com
concluded that 74% of the growth of the middle class population between 1995 and 2010 can be attributed to growth in average income. Regarding generational mobility it is the parents who are still a crucial determinant of second generation achievements. The education system is not enabling equal opportunities to the necessary extent. Where mobility within generations is concerned, economic growth has been lifting most incomes, particularly those of the poor. And while the middle class is expanding, two-thirds of the Latin American population remain poor. Osvaldo Rosales, from the United National Economic Commission for Latin America and the Caribbean (UN-ECLAC), examined international trade issues, including bilateral and multi-lateral trade negotiations, foreign trade patterns in the region, and intra-regional trade in Latin America. He declared that nearly 75% of intra-regional trade was zero tariff, but that many non-tariff barriers persist. There is insufficient progress (and recent setbacks) in trade liberalisation between Mexico and Mercosur, which lags behind on regulatory harmonisation (services, investment incentive policies, government procurement, and technical standards) and weak dispute resolution mechanisms. He pointed out that Latin America absorbs over 50% of Latin American manufacturing exports (excluding Mexico). This intra-regional trade illustrates a higher
level of intra-industrial trade; greater technological sophistication of exports; and higher export employment generation. It absorbs most FDI made by companies in the region and is an ideal location for local businesses to be part of the value chain. Intra-regional trade is losing relevance in the region where steel is concerned. The global steel industry
Boston Consulting Group’s Martin Woertler stressed that crude steel production is highly correlated with urbanisation and that the industry is very cyclical. Even a small decline in GDP hits steel demand hard. Woertler compared materials used by the automotive industry and contrasted the technical performance (density, specific tensile strength, and relative cost per part) of conventional steel with high strength steel, aluminium, composites, and other plastics. He concluded that conventional and high strength steel continue to achieve a satisfactory cost-benefit situation and how this explains why they maintain their dominant position in the automotive material mix, at least in the European experience. Fig 5 shows that consumption of conventional and high strength steel will increase from 44Mt in 2012 to 60Mt in 2030 (based on conservative estimates), but would retract to 42Mt in 2030 (under an accelerated scenario). In the latter scenario, aluminium would enlarge from 1Mt in 2012 to 13Mt in 2030, but steel January/February 2014
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32 CONFERENCE REPORT
Fig 9 Steel plants in Latin America. Source: Alacero
20 18 16 14 12 10 8 6 6 2
Extra-regional imports
Extra-regional exports
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
PLANTS: 112 Long products 36 Flat products 14 Seamless and welded tubes
Fig 8 Extra-regional indirect steel trade in Latin America, 2000-2011 (Mt)
would continue to lead the market. Woertler presented the forecast for the production and consumption of steel and raw materials for the period 2011-2021 (Fig 6). It seems wise to look carefully at compound annual growth rates (CAGR) rather than emphasising aggregate figures. For the whole period 2011-2021, Boston Consulting Group expects that crude steel production will obtain a 3.5% CAGR. In the interim, EAF and BOF production will register a 3.7% and 3.5% respective increase per annum. Fig 7 also demonstrates that potential iron ore supply would climb sharply by 5.0% per year, while iron ore demand would expand by 3.2%, leading to an oversupply situation that will consequently result in lower prices. As finished steel consumption strengthens at a rate of 3.7%, which is a little higher than crude steel production growth, the steel companies would achieve a higher yield. CRU’s Paul Butterworth discussed the global outlook for steel and raw materials, explaining how global crude steel production is set to climb by 3.7% in 2013. China, however, has been the primary driver of this expansion, by a sky-rocketing 7%. CRU anticipates that crude steel production will continue to increase, but that 2014 will experience the peak level of growth during the 2013-2018 period, at 4.9%. Average expansion rates will reduce, with growth variations between China and Rest of World at roughly 2% towards the end of the aforementioned period (Fig 7). Butterworth pointed out that crude steel demand will see continued growth over the next five years and that Chinese steel demand will not peak before 2021. Similarly, continued development in hot metal production – a key driver of demand for bulk raw materials – is expected. Growth in demand for hot metal will reach around 5% in 2014 and will gradually diminish to 3% as of 2018. As a consequence, CRU – in line with BCG – does not believe in any significant shift in the breakdown between BOF and EAF. Where raw materials are concerned, Butterworth emphasised the metallurgical January/February 2014
coal market, stating that margins during the 2010-2011 period were strong for most players and elevated prices encouraged high-cost producers to the seaborne market, particularly those in North America who were able to take market share from the incumbent Australian producers. In fact, the position of Australian producers has been undermined by disruptions to production, domestic cost escalation, and an appreciating currency. Through 2012, prices fell sharply, along with margins, and coal producers across the globe responded by focusing greater efforts on cost reduction. As a result of cost improvements, particularly in Australia, margins have recovered and CRU believes the market is returning to what existed prior to the Australian floods of 2011. Problems are building in the metallurgical coal market. CRU highlighted a number of projects, which were commissioned last year and scheduled for 2014, that are unlikely to make returns greater than the mining industry weighted average cost of capital (WACC), unless prices rebound strongly. These projects would have been initiated at a time when coal prices were much higher, and coal producers had much more optimistic expectations of the coal price. Given the focus on cost control and much greater scrutiny of investments across the mining sector generally, these performances could scare investment from the sector, which could have implications on supply in the medium-term. In other words, the metallurgical coal market tends to be tight. Latin American steel industry
Alacero president, Benjamin Baptista analysed the Latin American steel market. The situation of de-industrialisation and dependence upon commodity exporting is reflected in the region’s industrial production. Alacero repeatedly revised downward the figures for 2012 and the region finally recorded negative industrial activity, explained by a contraction in activity in Argentina and Brazil. Industrial
activities in Latin American will enlarge by only 1.8% in 2013 and by 2.8% in 2014. At a glance, the Latin American industry consists of 162 plants, of which 112 are dedicated to long steel products (Fig 9). Although capacity has amplified in recent years, production has stagnated since 2010, mainly because of import flows, described as ‘tsunamis’, in certain countries. Alacero expects modest growth in regional steel demand: a 1.5% increase in consumption in 2013 to 5% in 2014. Paying closer attention to the evolution of trade, Alacero said the import situation was worrying as it represents 28% of regional demand and a quarter of them come from China where low prices are supported, in some cases, by government subsidies or tax breaks. The situation is adversely affecting local industry because it can’t compete with unfair trade practices. Local production put in a poor performance in 2013 due to global volatility and a depressed construction sector, which accounts for 42.7% of regional demand. Latin America is a net importer of indirect steel trade. Fig 8 demonstrates that extra-regional indirect steel exports from Latin America have improved from 9Mt in 2005 to 11Mt in 2011. Meanwhile, respective imports have jumped from 10Mt to 17.5Mt. There is evidence of great demand for metal-mechanical products in the region. For Alacero, with the right governmental support, Latin American enterprises could produce these goods themselves rather than importing them and, thus, add value to locally produced steel. BCG estimates that Latin American steel production will expand by 5% per annum between 2011 and 2021, compared with global industry performance of 3.5%. In this way, the region’s participation will improve from 4.7% in 2011 to 5.8% in 2021. If this rather optimistic forecast is right, Latin America will surpass North American production volumes between 2016 and 2021, although Latin American steelmakers might be less gung-ho in their estimations. ᔢ www.steeltimesint.com
sti transport & handling MYRA_30_AIT_0110 1/8/14 2:26 PM Page 1
TRANSPORT & SCHEDULING 33
New initiatives bring hope Steel cargo at the Port of New Orleans
US steel industry and port transportation groups alike are touting the importance of recent governmental initiatives that could result in increased infrastructure improvements for the nation’s inland and coastal ports. Myra Pinkham*
photos by Tracie Morris Schaefer courtesy of the Port of New Orleans
“THE steel industry relies heavily on seaports and inland waterways to move raw materials necessary for steelmaking and to move finished products,” Thomas J. Gibson, president and chief executive officer of the Washington-based American Iron and Steel Institute, declares. Rob Roberson, materials and logistics manager for Nucor Corp’s Berkeley, S.C. mill, says that the nation’s waterways play a particularly important role for a number of that steelmaker’s divisions. “We have several steel mills located on rivers and some of these mills bring in more than 90% of their raw materials by river.” Also Nucor’s scrap steel business – the David J. Joseph Co. – transports approximately 3,500 scrap barges per year. “When assessing the waterways system, we believe that more frequent maintenance dredging is needed to maintain adequate drafts,” Roberson recently told the House of Representatives’ Transportation & Infrastructure Committee, adding, “Unfortunately inadequate draft levels are becoming an all too common occurrence.” That could be a problem with the fact that for every one-inch decrease in draft you lose 17 tons of cargo on a barge. “This forces companies like ours to use more costly alternatives,” Roberson says, calling barges a safe, efficient, environmentally friendly and cost effective way to move goods. “Each barge moves 1,500 to 1,700 net tons of cargo, compared with 80 to
100 tons for railcars and 20 to 22 tons for trucks.” Delays
Gibson observes that according to a recent report by the American Society of Civil Engineers (ASCE), the ageing ports and waterways infrastructure was responsible for delays costing $33 billion in 2010 and that such costs are expected to increase to nearly $49 billion by 2020. Upon announcing its 2013 Report Card for America’s Infrastructure, ASCE gave US inland waterways a near failing D-grade. ASCE call the United States waterways and rivers the hidden backbone of our freight network, as they carry the equivalent of about 51 million truck trips each year. However, in many cases the inland waterways system has not been updated since the 1950s and more than half of the locks are over 50 years old. “Barges are stopped for hours each day with unscheduled delays, preventing goods from getting to market and driving up costs,” the trade group points out. “Projects to repair and replace ageing locks and dredge channels take decades to approve and complete, exacerbating the problem further.” ASCE, however, gave the nation’s ports a somewhat better C grade. In its commentary about that decision, the trade group noted that the US Army Corps of Engineers estimates that more than 95% (by volume) of overseas trade produced or
consumed by the United States moves through its ports. “To sustain and serve a growing economy and to compete internationally, our nation’s ports need to be maintained, modernised and expanded,” ASCE states. The group says that while port authorities and their private sector partners have planned over $46 billion in capital improvements through 2016, federal funding has declined for navigable waterways and landside freight connections needed to move goods to and from the ports. Overall freight volumes in and out of US ports are up and are forecast to continue to increase in the next year, says John Vickerman, president of Vickerman Associates, Williamsburg, Va., who maintains that trade volumes are on a very similar glide path to the one it had been on prior to the economic downturn in 2008-09 with a majority of ports’ volumes (albeit more from containerised than break bulk trade) being at record levels. On the West Coast, he says they are seeing a 2:1 ratio of imports (largely from Asia) while the ratio on the East Coast is more balanced. Steel volumes ‘aren’t bad’
When it comes to steel, however, US imports are down 4.6% year-on-year, although still higher than they had been prior to 2012, observes Rex Sherman, research director for the American
*Myra Pinkham, USA correspondent www.steeltimesint.com
January/February 2014
sti transport & handling MYRA_30_AIT_0110 1/8/14 2:26 PM Page 2
34 TRANSPORT & SCHEDULING
Association of Port Authorities (AAPA), Alexandria, Va. “Steel volumes really aren’t bad,” he says, especially with all of the political wrangling and the effect that has had on business confidence and weakness in other global economies, such as Europe. Steel imports at the Port of New Orleans were actually pretty good during the first six months of the year, but came down slightly in the second half due to certain trade action, particularly on wire and wire rod products, observes Robert Landry, chief commercial officer for the port. Thus far there continues to be strong import volumes of oil country tubular goods, he says. Whether that will continue largely depends on the outcome of the OCTG trade case that a number of US pipe mills filed early in July against nine countries – India, the Philippines, Saudi Arabia, South Korea, Taiwan, Thailand, Turkey, Ukraine and Vietnam. Gibson observes that US domestic steel mill shipments have been down 2.4% year-to-date through September including a 5.6% month-on-month decline. Steel volumes at certain ports have, however, been quite good this year. For example, Heather Bunning, a spokeswoman for the Ports of Indiana, observes that steel shipments at
10-15%, but automotive sheet imports have increased for steel destined to some of the new domestic automakers located in the South. Outlook good for barge traffic
Jeffersonville, Ind., were up 28% year-onyear, partly due to the addition of three steel-related businesses at the relatively young port within the last two years. “At the same time we continue to develop new infrastructure at all of our three ports – Jeffersonville, Burns Harbor and Mt. Vernon,” she says, noting that the authority has spent $35 million of its own money to support these projects, including upgrades to its rail system and improvements to its intermodal transportation. Jimmy Lyons, director and chief executive officer of the Alabama State Port Authority, observes that steel slab shipments to the new ThyssenKrupp Steel USA LLC mill in Calvert, Ala., are up
Ever since the recession ended, barge traffic along the inland waterways has picked up, although more for grain than for steel, observes Dennis Wilmsmeyer, president of Inland Rivers Ports and Terminals Inc. and executive director of America’s Central Port in St. Louis, Mo. “The outlook is good for barge traffic,” he says. “New barge construction is up 5-7% this year, which is a good thing for the industry.” He says that there has also been construction of several new facilities along the inland waterways, largely using private funding and in some cases with federal or state monies as well. “New terminals are a good thing for the river,” he declares. “Most port capital investments are now being funded by the port authorities themselves or their private sector partners as there is little federal money available,” Aaron Ellis, an AAPA spokesman, states. “We have been trying to get the federal government to make it more of a priority to invest in getting freight in and out of the nation’s ports, but it has been a big challenge.” Some federal funds have been available for port-related projects through the US Department of Transportation’s Transportation Investment Generating Economic Recovery (TIGER) grant program, now
Steel cargo at the Port of New Orleans
photos by Tracie Morris Schaefer courtesy of the Port of New Orleans
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TRANSPORT & SCHEDULING 35
in its fifth round. It was established under the American Reinvestment and Recovery Act. In its first round of TIGER grants, portrelated infrastructure projects received only 7% of the original $1.5 billion allocated, although it did better in later rounds garnering 17% in round two, 12% in round three and 16% in last year’s fourth round. This year about $103.7 million, or about 21.9% of total funding is going to projects that aid the movement of goods through America’s seaports.
funded by monies from barge owners and diesel fuel purchases, has been running in deficit since 2009, largely because one project – the Olmsted Locks and Dam project in Illinois – has been consuming 80% of the trust fund’s monies. The bill is seeking to fix that by finding another funding category for that project, Jessie Perkins, AISI’s director of government relations, says. “We are optimistic that differences in the two versions of this law will be rectified and that it will become law,” AAPA’s Ellis says. “There is strong desire in both houses of Congress to develop bi-partisan
Big River Coalition and the Louisiana Department of Transportation and Development that stated that deepening the Mississippi River to 50 feet from its current 45 foot draft, therefore allowing for today’s larger vessels, would create $11.49 billion in increased US production, generate 16,991 new permanent jobs and account for $849.5 million in increased income for American workers. Sandor Toth, publisher of River Transport News, however, played down what the ultimate effect of a water resources bill would be, maintaining that it would only maintain funding for existing infrastructure
legislation.” It is especially critical to do something with the inland waterways, Wilmsmeyer maintains. “Most of the locks and dams are 70 years old and you just need one to go to stop traffic all the way up and down the river.” “We are a thousand per cent behind this,” says Port of New Orleans’ Landry, stating that he is optimistic that Congress has come to recognise the value of the water transportation system to the US economy.
projects, allowing those that are currently half or two thirds completed to get closer to completion, but won’t result in any substantial funding of any new projects. Yet another bill, the Building and Renewing Infrastructure for Development and Growth in Employment (BRIDGE) act, introduced in the US Senate in midNovember, while not having a direct impact on port infrastructure, is another indication of how important infrastructure building is to making sure US industry is competitive, Kip Payne, manager of government relations for AAPA, says. “It shows there is growing recognition of how international trade is key to growing our economy.” ᔢ
Water infrastructure bill
Perhaps more significant is that, at the time of going to press, the US Congress was at the cusp of passing its first water infrastructure bill in nearly seven years. Versions of this bill, which would allow the Army Corp of Engineers to authorise significant seaport and inland waterways infrastructure investments, prioritise the nation’s water infrastructure needs and reduce the red tape to get currently stalled projects completed, have already been passed by both houses of Congress. Estimated to create about 500,000 jobs, Gibson says that this legislation will enhance commerce on the nation’s waterways by equitably steering barge fuel fees to lock and dam projects necessary for navigation and will pilot an innovative financing loan program, ensuring the completion of desperately needed infrastructure projects. One of the current problems with funding current water infrastructure projects, according to Kevin Dempsey, AISI’s senior vice president for public policy, is that a lot of the money in the Harbor Maintenance Trust Fund raised by the federal Harbor Maintenance Tax, is being used for other things than just infrastructure improvements. This bill is seeking to change that. Meanwhile the Inland Port Trust Fund,
Making room for larger vessels
This value is supported by a study by economist Tim Ryan, commissioned by the
www.steeltimesint.com
January/February 2014
russula_30_AIT_0110 1/16/14 11:26 AM Page 1
36
The entire water treatment plant for AHMSA was built in 12 months
AHMSA’s plant built in a year The water treatment plant for AHMSA’s new Steckel plate mill at Monclova, northern Mexico, was designed, built and ready for commissioning within one year by the use of 3D CAD and pre-assembled modular pipe work.
IN 2006, Altos Hornos de Mexico (AHMSA) launched Project Fénix, to increase liquid steel production capacity to 5Mt/y. The project includes the installation of a 1.2Mt/y electric arc furnace, a ladle furnace, a new 1.2Mt/y continuous slab caster and a new Steckel mill for manufacturing steel plate. The continuous caster (No 4) produces slabs up to 96 inches (2438mm) wide and 6-8 inches (152-203mm) thick. The new Steckel mill, modified from an existing plate mill, has improved steel plate output from 500kt/y to 1Mt/y. In addition, elsewhere at the works, beam and section production has been increased by 350kt/y. Project Fénix also includes auxiliary equipment such as a new oxygen plant, an electricity substation and a water treatment plant. Russula was selected for the turn-key supply of the water treatment plant for the new Steckel plate mill. The treatment plant has a capacity to clean 7400m3/h (32,657 USg/min) of water that has been in direct contact with the mill rolls or product and 4600m3/h (20,300 USg/min) of noncontact circulating cooling water. The main equipment is designed around Russula's twin decanting concept, complete with ring filtration and cooling towers built on site. The recirculating water system is designed to meet stringent water quality requirements after cleaning including total suspended solids, PH and temperature. Russula supplied all the basic and detailed engineering for the treatment January/February 2014
laminar contact water to quench the rolled product; a non-contact water circuit for the mill; and a non-contact water circuit for cooling the reheat furnace. Contact water for mill rolls
Fig 1 Four stage process for contact water treatment
plant as well as all mechanical and electrical equipment with comprehensive installation and contracted and supervised the construction company. Training will take place during the official start-up of the Steckel mill later this year. The entire water treatment plant was constructed in a year from breaking ground to final installation. The Steckel mill and water treatment plant was started up in August last year. This is the 10th water treatment plant that Russula has successfully supplied worldwide. Besides AHMSA, Russula has four other water treatment plants currently in development or construction. These are for Severstal, Gusa Nordeste, Gerdau and the Simec Group. AHMSA’s water treatment plant
The water treatment plant for AHMSA’s new Steckel mill consists of four circuits: contact water for the mill rolls spray,
The water treatment system for the cooling water sprayed onto the mill work rolls has the capacity to treat a 3000m3/h volumetric flow rate. This open system follows the four stages shown in Fig 1 for treating water in contact with the mill rolls or rolled plate. To save costs, Russula used an existing hydrocyclone as the first stage removal of coarse particles, instead of a scale pit. The hydrocyclone removes particles equal in size or greater than 200 m. The density difference between the water and the scale, makes the larger, heavier particles deposit on the bottom of the hydrocyclone to be removed later. Water with particles less than 200 m continues via longitudinal decanters where smaller particles not removed by the hydrocyclone are removed by entrainment. The particles that fall to the bottom of the longitudinal decanters are collected by a dual function bridge scraper and pumped to the sludge thickener tank and then pass to the press plate filter press. Any grease and oils remaining on the surface of the water are swept away by the upper part of the bridge scraper and guided to the oil skimmer. The treated water then passes to the ring filters. The main objective of filtration is to eliminate particles that have passed the www.steeltimesint.com
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ROLLING 37
previous cleaning processes and have a greater density than water. At AHMSA, the ring filters are installed in two batteries together containing 11 filter cartridges in total. Each filter battery weighs only 2 tonnes. Due to their low weight and the small space they occupy, installation of the ring filters did not require any additional civil work, enabling them to be installed next to the decanting basins. The ring filters consist of polypropylene filter cartridges placed on top of each other, creating channels. The available filter grades range from 20μm to 400μm. Backwashing of the ring filters is fully automatic and programmable based on pressure difference, time or other combinations. Filtered water is pumped to the cooling towers before it is recirculated to the Steckel mill. Four groups of cooling towers are divided into nine modular cells. Laminar contact water
plant under a turn-key agreement, which included selecting the construction company in Mexico and supervising the civil work and assembly. By first developing the engineering of the plant as a 3D perspective drawing, civil works, piping, supports and equipment installation work were optimised and assembly time minimised. Power is supplied through two input feeders and four 13.8kV output feeders supplied from four oil-filled transformers each of 3000kVA. Variable frequency drives
SINAMICS S120 variable frequency drives regulate the flow of the contact water through the hydrocyclone and longitudinal decanters, for treating the mill and laminar product cooling contact water as well as the PEMO pump which pumps sludge from the thickener tank to the filter press.
to control and interface with the water treatment plant. This is integrated with the mill control system. Pumps
Low and medium voltage (4.16kV) submersible and horizontal pumps are used throughout the water treatment plant. The pumps are made of abrasionresistant materials, with higher specifications for those pumps in the contact water circuits where there is the presence of mill scale and sludge. 23 tonnes of valves, instrumentation and special sensors control the treatment plant. Russula supplied all the mechanical equipment including ring filters, decanting basins, plate heat exchangers, thickener tank, cooling towers, bridge scrapers, skimmers to remove oil and grease, filter press and metering pumps. 310 tonnes of piping and 80 tonnes of
Cooling towers
The laminar contact water treatment system is designed to treat a 4400m3/h volumetric flow rate and employs the same philosophy and equipment as the four stages of the contact water for the mill rolls previously described. This circuit and the mill roll contact water circuit share the hydrocyclone, sludge thickener tank and filter press. Non-contact water for mill
The non-contact water circuit for rolling cools the heat exchangers on the lubrication and hydraulic units, instruments and air conditioning. It is designed to treat a 3400m3/h volumetric flow rate. Modular cooling towers were also included. Non-contact water for furnace cooling
The non-contact water circuit for cooling the slab reheat furnace and for the coil box furnace on the Steckel mill is designed to treat a flow rate of 1200m3/h. Russula also included cooling towers and plate type heat exchangers for water cooling (Fig 2). The water treatment plant at AHMSA was generated as a CAD three-dimensional diagram. The use of CAD enables 3-D development of an integrated plan of the engineering and civil works including pipe, supports and optimised equipment layout. This results in minimising assembly time. There are five decanters, two batteries of ring filters and a total of 11 filter cartridges to treat the mill roll and laminar contact water, and four groups of cooling towers with a total of nine modular cells. The noncontact water does not need filters in this project.
The electrical room includes a 750kVA emergency generator as well as the four 3000kVA oil transformers. Russula supplied all the low voltage distribution system and used removable panels for the circuit breakers for ease of access. Each panel contains a relay system with intelligent SIMEAS − an electrical network fault and power/frequency recorder from Siemens − which enables each panel to have independent power management. The motor control centres, (MCC)s, were provided with communication through intelligent relays and profibus, instead of the typical control cables to connect the PLCs to the MCCs. This resulted in large cost savings by minimising cable runs, cable mountings and wiring time. The Medium Voltage Motor Control Centre is supplied by an input feeder and seven output feeders plus a 4.16kV spare feed for the pump unit leveller pit, instruments and the group of cooling pumps for the direct cooling water circuit. Control system and HMI
Turn-key supply
Russula provided the water treatment www.steeltimesint.com
A S7-417H CPU, eight S7-300 remote PLCs, 800 IOs and a WinCC HMI, are used
prefabricated metal structures are used in the construction. Installation of prefabricated piping minimised the welding of pipe work during assembly, which streamlined project implementation. From breaking ground to final assembly, the entire water treatment plant was completed within one year. This short implementation time was a result of developing the engineering layout in 3D using CAD and by employing prefabricated steel piping. The materials used during construction were 6600m3 of concrete, 16000m2 of form work, 515t of reinforcing steel, 58t of embedded metal, 15 miles of electrical conduits and over 23000 items of hardware. 27500m3 of excavation work were also carried out. From the moment that civil works started, and for a period of one year until assembly ended, specialised engineering staff from Russula were responsible for overseeing the civil works and assembly carried out by the construction company contracted by Russula. Russula’s engineering specialists were on-site to commission the water treatment plant for the new Steckel mill. ᔢ January/February 2014
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38 PERSPECTIVES: GUILD INTERNATIONAL
An amazing future ahead Mike Wheeler, president of USA-based Guild International, believes the steel industry has an amazing future but that older, less efficient, highly polluting plants should be phased out – or revamped – to ensure that higher quality, less polluting steel factories are producing the world’s steel. 1. How are things going at GUILD INTERNATIONAL? Is the steel industry keeping you busy?
We have been very fortunate over the past 10 years due to many projects for both the stainless, carbon and silicon as well as speciality steel industries. Currently we are manufacturing a number of resistance and arc welding machinery along with some tube mill entry machinery. 2. What is your view on the current state of the global steel industry?
Also, we are in the middle of commissioning six welders just north of Shanghai in a facility where they process both carbon (four welders) and silicon (two welders) steels. We hope to complete this by the spring of 2014. In all cases the strip width is about 1,300mm wide. We recently completed a project near Shanghai where we supplied five welders for special alloys. For Guild it is a big benefit to be able to supply nearly the full range of welders for most strip processing lines.
It seems after a multi-year sharp increase in stainless, carbon and silicon steel capacity in many markets, the current growth is subdued, and in there is growth in smaller markets, such as Turkey, Vietnam, Myanmar, Indonesia, India and Mexico.
4. Where in the world are you busiest at present?
We are currently busy in China, Turkey, Vietnam, Mexico and the USA. 5. Can you discuss any major steel contracts you are currently working on?
We are just completing the commissioning of five welding machines at a new site in Turkey for producing stainless steel. The welders were supplied for a bright anneal line, coil build-up line, hot rolled anneal and pickle line, a cold rolled anneal and pickle line and a grinding line. The material thickness ranges from 0.3-8.0mm and in widths up to 1650mm. Many grades of stainless are processed. January/February 2014
8. In fact, talking of ‘green issues’ and emissions control, how is the steel industry performing in this respect?
We are occasionally asked to complete our customers’ Emissions and Pollution forms regarding by-products and emissions from the welder, and due to the relatively clean nature of welding the coil ends together, we have very little to report on these forms as mostly fumes and heat are generated. 9. In your dealings with steel producers, are you finding that they are looking to companies like GUILD INTERNATIONAL to offer them solutions in terms of energy efficiency and sustainability? If so, what can you offer them?
3. In which sector of the steel industry does GUILD INTERNATIONAL mostly conduct its business?
The welders designed and manufactured by Guild are widely used in the processing of various steels, stainless, carbon, silicon and other alloys such as aluminium, and in many speciality metals such as copper alloys, stainless alloys and so on. Typical applications are in coil-to-coil process lines, such as hot rolled annealing and pickling lines (HAPL), galvanising lines, heat treat lines, grinding lines and (BAL) bright anneal lines (BAL).
Both materials are widely used and readily recycled and depending upon the application, both materials will have advantages in various uses.
Most purchasers expect their suppliers to be aware of future potential issues and try to work around or avoid them. For example, in the laser we are offering in the market, there is often no need for welding gases, much less helium, which is required in many lasers and may have future issues of supply. We try to avoid the problem ahead of time, when we can. 6. “Aluminium will always outperform steel on a weight basis; and on the stiffness issue alone it will carry the day,” said Alcoa’s chief technology officer Ray Kilmer speaking about aluminium usage within the global automotive industry. Where do you stand on the aluminium versus steel argument?
There is obviously a need for both metals and depending upon future developments for both materials, they will continue to compete against each other and against carbon fibre, plastics and other developing materials. 7. It is always claimed that aluminium is the ‘greener’ metal when compared to steel. What’s your view?
10. How quickly has the steel industry responded to ‘green politics’ in terms of making the production process more environmentally friendly and are they succeeding or fighting a losing battle?
The process becomes more efficient every year, which reduces the total possible pollution. Our welding machines produce heat, and in some cases fumes, during Mig welding. Overall, the process is very clean. 11. Where does GUILD INTERNATIONAL lead the field in terms of steel production technology?
Guild designs and manufactures a line of arc, resistance and now laser welders for www.steeltimesint.com
guild.QXP_30_AIT_0110 1/13/14 9:16 AM Page 2
PERSPECTIVES: GUILD INTERNATIONAL 39 the steel process industries. It is unusual for one company to offer all three types of welder and this can be an advantage to the customer in terms of spare parts and service requirements and in commonality of the software used in these machines. Guild is widely known in the stainless steel, silicon steel and carbon steel industries. The unique and robust welder designs are used for welding coil ends anywhere from .01mm to 22mm thick and in widths up to three metres. 12. How do you view GUILD INTERNATIONAL’s development over the short-to-medium term in relation to the global steel industry?
We are excited to be more involved in supplying fibre laser welders for the carbon and stainless markets. Due to the unique and rugged design of Guild arc welders, it is possible in some cases to retrofit an existing Guild welding machine with newer laser welding technology. Depending upon the condition of the welding machine, it may be necessary to have the machine inspected and rebuilt to insure that the tighter laser requirements are met. 13. In a similar fashion to the aluminium industry, China dominates global crude steel production and is accountable for almost half of total production. How should the industry react to this situation?
The technology for most of the growth in the steel industry came from the other steel producing countries, so the growth in the Chinese steel industry should not come as a surprise to anyone. Future steel growth will occur in the many less developed countries, which need to
www.steeltimesint.com
upgrade their steel making to insure they are efficient, produce less pollution and can produce the higher quality of steels being developed constantly. 14. The Chinese still rely heavily upon Western steel production technology. What is GUILD INTERNATIONAL’s experience of the Chinese steel industry?
We have been very fortunate to have been involved with many carbon steel, stainless steel and silicon steel projects throughout China since 2001. We see the entire range of steel processing facilities from very basic to the most modern in the world. Most of the projects we are involved with are new steel process lines, so the technology is usually the latest and best available. Initially we were surprised by the fact that in most cases the Chinese wanted high technology and that was more important than equipment costs. 15. Where do you see most innovation in terms of production technologies – primary, secondary or more downstream?
17. What exhibitions and conferences will GUILD INTERNATIONAL be attending in 2014?
As usual we will attend the FABTECH show in the USA, we will once again consider EUROBLECH in Hannover, and we will look at one or two shows in the Asia/Southeast Asian markets. 18. GUILD INTERNATIONAL is based in the USA, but what’s happening steelwise in the country?
There are a number of projects we are involved with such as designing and supplying entry end equipment that usually consists of an uncoiler, flattener, shear welder and horizontal strip accumulator. This machinery supplies continuous strip to the tube or pipe mill. We have also been involved with retrofitting some older models of welding machines, both in the United States as well as projects around the world. 19. Apart from strong coffee, what keeps you awake at night?
We are involved only in secondary and downstream processing, so the changes we see are often in the secondary sector.
I believe we all wonder about the continued use of too much debt and the resulting consequences of these actions, which cause major upheavals in the global economy.
16. How optimistic are you for the global steel industry going forward and what challenges face global producers in the short-to-medium term?
20. If you possessed a superpower, how would you use it to improve the global steel industry?
I believe the steel industry has an amazing future with a short-to-medium risk of a worldwide economic slowdown caused by any number of reasons, mostly revolving around continued over reliance on debt to fund current spending.
It would be an improvement, in the long run, if the older, less efficient, outdated, highly polluting steel factories would be phased out, or revamped, to ensure that higher quality, less polluting steel factories are producing the world’s steel. ᔢ
January/February 2014
HISTORY STI_30_AIT_0110 1/8/14 2:36 PM Page 1
40 HISTORY
Men of iron, men of steel The forerunners of the Industrial Revolution were a group of individuals with varying interests in the opportunities that lay before them. By Harry Hodson* 1
2
3
4
5 1. Henry Bessemer 2. Henry Cort 3. Henry Maudslay 4. James Nasmyth 5. John Wilkinson
ABRAHAM Darby (1678-1717) sparked the industrial revolution into life when he used coke as an alternative to charcoal to fuel Britain’s blast furnaces, but even he is preceded by Dud Dudley, (1599-1684) one of the first Englishmen to smelt iron ore using coke. But what had Darby learned from Dudley? The use of coke transformed ironworking, which had changed little since Roman times, into an industrial undertaking. At about this time, the total production of iron in Britain amounted to 20kt per year, with a similar amount being imported from Sweden and Spain. In some cases it was found to be more cost effective to work the old Roman sites for ore, rather than mine new ones. Coke, however, would quickly change this cottage industry as it was about to be taken over by a group of men known as the Ironmasters. Foremost among them were the Darby family dynasty, John (iron mad) Wilkinson, Richard Crawshay of Cyfarthea in South Wales, Roebuck of Carron in Scotland, and Bacon of Merthyr Tydfil, Wales. Darby’s method of smelting iron ore by coke, together with an increased blast and other modifications, eventually began to be used by others, output increased and Britain became an exporter. The problem with an increased output of pig iron was that it could not be refined fast enough. The refining process still needed charcoal, which was becoming scarce due to government restrictions. Henry Cort, an iron master from Gosport in Hampshire, was the most successful in solving the problem. Cort took out a patent to reduce carbon in the pig iron by means of his “puddling” furnace using coal. He also invented and patented the rolling mill to replace the hammer in the production of iron bars. Until then, it had taken 12 hours to hammer out a ton of iron into bars. Cort’s rolling mill produced 15 tons in the same time.
Cort had overstretched himself financially in the development of these two patents and sought the help of a Naval pay master called Jellicoe, pledging his patents as security. Unfortunately for Cort, Jellicoe – whom he had known since his earlier career as a naval agent – turned out to be a rogue with financial problems of his own. He was convicted of embezelling government funds and his newly acquired patents were confiscated. This had the effect of diverting royalties away from Cort and gave the ironmasters a considerable amount of time to carry on without paying him the ten shillings per ton for the use of his patents. Henry Cort was now a ruined man. James Watt commented that he was a simple and honest man who was treated badly by dishonest people. Cort was granted a small pension by the government, but he died in poverty aged 60 in 1800. Industrial espionage
We hear of court cases from time to time where someone is accused of copying another person’s ideas for financial gain. This is nothing new: James Watt and Mathew Boulton broke off a long business association with John Wilkinson who was entrusted with the accurate machining of their steam engine parts. Wilkinson was actually pirating their engine while casting and machining the parts. In due course he began to manufacture his own engines, but was forced to pay compensation to Boulton and Watt for his misdeeds. Perhaps the most well known case of industrial espionage, is that of Benjamin Huntsman. Born in Lincolnshire in 1704, he showed a great interest in machinery, especially clockwork mechanisms, from an early age; and this enabled him to follow a profession in clockmaking. He realised that better quality steel was needed than that being made in Britain. Huntsman made little attempts to address the problem and
concentrated instead on quality. After a series of experiments with iron smelting, he succeeded in making crucibles that were a cut above those in use at the time. This, together with a few technical problems he had solved, made him well known in the steel industry. Huntsman didn’t safeguard his ideas with patents. Instead, he chose to manufacture steel through the night by a workforce sworn to secrecy. A tale that has often been told over the years, is that of a poor “tramp” who entered the works yard to seek warmth and shelter on a dark, stormy night. The workmen allowed him to sleep in a warm shed close to the furnaces, having shared their food with him. The tramp only pretended to be asleep and closely watched the workmen as they went about the business of steelmaking. In later years it was said that tramp was none other than Samuel Walker, a Rotherham founder, whose works supplied Thomas Telford with much of his ironwork in later years. James Nasmyth inventor of the steam hammer, and Henry Maudslay, who perfected the screw cutting lathe, gave the industrial revolution the tools it required. Such was the engineering skills of Maudslay, that the young Brunel was sent by his father to Maudslay’s Lambeth works to gain practical experience. Finally, we come to Henry Bessemer, father of the modern steel industry, who was born in 1813. His method of steelmaking revolutionised production and changed the age of iron to that of steel. Bessemer did not receive a knighthood for his work in the steel industry; it was awarded for his other work as an inventor. Henry Bessemer was to steel what John Wilkinson was to iron, but the two men were totally different in the way they conducted their lives and business. Further reading is recommended for these two icons of the industrial revolution. ᔢ
*The author is a former employee of John Grundy Ltd and has first-hand experience in the making of the stoves. Dedicated to the fond memories of W Jacques and E Jones. Foundry foremen.
January/February 2014
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