Prime Magazine v7i4 by San Dieguito Printers

M. Murat Eryilmaz CEO, SteelOrbis

CEOLetter

WelcomeBack

t’s funny how such a big deal is made of New Year’s, when for most people and businesses it does not aﬀect their daily routine (unless they celebrated a little too much the night before). Labor Day, in contrast, is true to its name. After a summer of vacations and more relaxed operations for several business segments, including the steel industry, we come back to work to face a new season, a new flow in demand, a last chance to make quarterly and yearly earnings count (clearly the New Year has long-term accounting significance). It is a revitalization in ways January 1 couldn’t hope to be, so for that, I wish you all a hearty “Welcome Back.” But now that you’re here, relaxed and recharged, don’t get too comfortable. No matter which segment of the steel industry you’re in, there are enough news developments and economic concerns and crucial decisions to fill your attention all the way until New Year’s Eve. For example, several final rulings in key steel trade cases are due this fall, but more important than whatever margins are (or are not) set will be the market’s reaction to them. Keeping current with news stories and import/export price trends on SteelOrbis.com

will ensure you see the reaction as it’s happening. Another simmering development in the steel industry that deserves a watchful eye is the recent replacement of steel with aluminum in some aspects of US auto manufacturing. Our feature story on page 34 discusses the history and potential future of this conflict, and while the outlook for flat steel doesn’t aﬀect everyone in the steel industry, the outlook for the fabrication segment might, considering how much steel is fabricated at the end of the supply chain. An interview with the president of the American Institute for Steel Construction on page 20 delves into a more general-interest steel use forecast. In between paying attention to news and intel and industry insiders, don’t forget one of the best ways to keep appraised of everything that matters to your sector: industry events. It’s not too late to register for the 71st IREPAS Meeting and SteelOrbis conference in Berlin, Germany on September 28-30, and it’s not too early to check out SteelOrbis’ annual Rebar & Wire Rod conference in Las Vegas on February 2 of next year. Featuring a

variety of experts and perspectives and exclusive networking opportunities, events such as these are as valuable as they are enjoyable. I hope to see you at both. And even more long term, try to find a few minutes every day to ask yourself what the big picture is for your business and its place in the industry. Where do you want to be in the next year or five years or decade? What kind of investments and strategies would you have to implement to make it happen? Prime Editorin-Chief Katie Memmel has some ideas in her Editor’s Corner column on page 64, and as it is with any kind of brainstorming, the more ideas, the better. So even if Labor Day is more of a significant shift for more people than New Year’s, every day is significant in its own way, filled with choices and opportunities and lucky chances. Every morning you should tell yourself “Welcome Back” in the mirror, and directly after, “What’s next?”

With warm regards,

Contents

48 SSAB makes the case for AHHS

28 Severstal bids farewell

Beyond the blacksmith

Hard times ahead for Brazilian steel War of the Metals

Interview / Beyond the blacksmith Roger Ferch, President of AISC, discusses how far fabrication has come

Steel Scope / Spanish steel on the rise e European country is climbing the ranks in global steel significance

News Focus / Severstal bids farewell e Russian steelmaker sells its assets in the US— will others follow?

Aço Brasil / Hard times ahead for Brazilian steel How the nation is struggling to keep up production, sales and consumption

Feature Story / War of the Metals Steel and aluminum duke it out in the US automotive sector

Steel Spotlight / SSAB makes the case for AHHS Kenneth Olsson of SSAB claims “nothing can compete” in the automotive market

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Volume 7; Issue 4

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16 Interview / Troubles in Taranto Antonio Gozzi, president of Italian iron and steel association Federacciai, discusses current concerns in the Italian industry, especially regarding steelmaker Ilva

33 Interview / Exports on a roll SteelOrbis Shanghai speaks with Xu Qian, Overseas Market Manager of SUMEC International Technology Co. about the prospects for Chinese steel trading in H2.

Prime is published by SteelOrbis Elektronik Pazaryeri A.S. Mustafa E. Say Director Murat Eryilmaz

Editorial Director Burcak Odabasi

Editor-in-chief Katie Memmel

GM - Americas Brock Watson

Editors Margie Palmer, Baris Yarsel, Leonardo Siqueira John Fitzgibbon, Luca Veronesi

6 Steel News 8 Market Analysis 18 Bull & Gloom 26 Aceros Noticias 30 World Economic Report 41 WSD Strategic Insights 42 Events 47 Steel Marvels 50 Supply Lines 52 Light Gauge 54 Trade Law Watch 56 Fabricator’s Corner 60 Crossword 63 Price Reports 64 Editor’s Corner

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USA: +1 (713) 589-6049 Italy: +39 (030) 376-2340 China and Far East: + 86-21-5385 3535 Turkey: +90 216 468 10 50 E-mail: content@steelorbis.com Advertise: advertise@steelorbis.com Website: www.steelorbis.com e points of views expressed in the articles in Prime are those of the authors. Questions may be made by indicating sources. Prime is distributed to SteelOrbis subscribers free of charge.

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Volume 7; Issue 4

SteelNews AHMSA to invest US$370 million this year Mexican steelmaker Altos Hornos de México (AHMSA) said they will invest US$370 million in total this year, which will be used in the completion of the steel project “El Fénix” in Coahuila, to purchase equipment and open new mines. With these resources the company prepares its supply of steel and steel products for the manufacturing, construction, automotive, oil, packaging and household, and especially appliance sectors. After the presentation of the National Infrastructure Program, which promises investments of 7.7 billion pesos (US$ 592.3 million) from the federal government, the steelmaker said it was ready to improve its performance. Francisco Orduna, AHMSA’s director of Institutional Relations and Communication, hoped that the projects covered, including the gas pipeline network, would support an increase in local content.

ArcelorMittal Dofasco to pay $390,000 fine for air emissions During the last week of May, Canada, Ontario-based ArcelorMittal Dofasco announced that six out of 13 air emission charges it had been facing were settled at court resulting in a fine of $390,000 related to the company’s coke making operations violating emission standards. e other seven charges had been withdrawn. e charges were filed for releasing coke-oven dust into the air in 2012. ArcelorMittal Dofasco said, during that time period and since, it has committed to continuously improving its operating procedures and performance. At the same time, the company continues to invest in both repair and maintenance and capital improvements for the plants. Since 2010, the company has invested more than $200 million in its coke making operations, and also

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EXTRA, EXTRA...

announced earlier this year investment of another $87 million over the next five years. e company’s long-term coke making strategy includes the $87 million investment in major restorative work at its coke plants No. 2 and No. 3 along with the shutdown of its coke plant No. 1 in early 2015.

Essar Steel Minnesota denies “for sale” rumors In early June, Hibbing, Minnesota-based Essar Steel Minnesota LLC (ESML) released an announcement that categorically denied that Essar Global Fund Limited (EGFL), ESML’s India-based shareholder, was considering selling the business, contrary to media reports. ESML’s President and CEO, Madhu Vuppuluri, commented: “We are very pleased to have closed $450 million of bond financing for ESML in the last few weeks. At this significant milestone we look forward to completing ESML’s world class 7 million mt per annum fully-integrated pellet production facility and to an exciting future for ESML. “ESML will add 7 million mt per annum of pellet producing capacity to EGFL’s existing 20 million mt per annum of pellet producing capacity operating and under development in India. Accordingly, it is a core investment in the EGFL portfolio.”

Mexican shipping association confirms details of detained iron ore ships In the second week of June, oﬃcial data showed the Mexican government had stopped the export of about 300,000 tons of iron ore (totaling US$30 million) since March from four ships: one containing 68,000 tons, two ships with 100,000 tons each, and a fourth ship whose volumes were still being calculated. Francisco Orozco, president of the Mexican Association of Shipping Agents (Amanac), acknowledged that seized shipVolume 7; Issue 4

ments were made through international shipping lines headed to China, and the ships remain anchored in the bay of Manzanillo on the instructions of federal authorities while they investigated operations that are accused of illegally exporting of iron ore. Orozco noted that while the vessels were stopped at the Port of Lázaro Cárdenas, the identification of the originating mines are still unknown. According to Alonso Ancira, president of the Mexican National Chamber of Iron and Steel Industry (Canacero), last year 10 million tons of iron ore from illegal mines were exported to China, resulting in losses for US$1 billion for the Mexican domestic steel industry.

Canadian government approves 1,100 km pipeline project During the middle part of June, the Canadian Steel Producers Association (CSPA) welcomed the decision by the Government of Canada to approve the proposed Northern Gateway project, subject to 209 required conditions. e Government of Canada agreed that, with the 209 recommendations laid out by the National Energy Board, the Northern Gateway project is in the best interest of Canada. e twin pipeline, which would transport Canadian energy resources more than 1,100 kilometers from Northern Alberta to new port facilities in Kitimat, B.C., holds the potential to generate significant direct and indirect benefits to Canada’s steel producers, their workers, and their communities. e $6.5-billion project is an example of the type of energy sector development that the CSPA advocates. Canadian steel is a crucial link in Canada’s oil and gas supply chain, which generates 660,000 jobs across the country and an economic output of approximately

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US Steel settles $58 million antitrust lawsuit In mid-July, US Steel agreed to pay $58 million to settle a class action lawsuit in an Illinois federal court. e lawsuit, which was filed in 2008 by Standard Iron Works on behalf of “direct purchasers of steel products,” alleged that eight US-based steel producers including US Steel violated federal antitrust laws by strategically restricting steel production between 2005-2007 in order to raise prices. Other steel mills named in the suit that had already settled included ArcelorMittal ($90 million), AK Steel ($5.8 million), Gerdau ($6.1 million) and CMC ($4 million). Nucor, Steel Dynamics Inc. and SSAB were also named in the suit. AHMSA subsidiary website hacked, machinery offered for sale Also in late July, Altos Hornos de Mexico (AHMSA) reported to government agencies that unknown persons made available within the Internet a fake page of its subsidiary Minera del Norte (MINOSA), through which they supposedly oﬀered for sale various vehicles and heavy machinery. e company stated in online public forums that this website is fraudulent and that its subsidiary Minera del Norte disclaims any crime that can be committed through it.

World Cup slows down Brazil’s crude steel production In the last week of July, it was announced that Brazil’s crude steel production fell 4.9 percent in June, year-on-year, to 2.6 million metric tons (mt), according to the country’s steel institute (IABr). “We’re seeing the portrait of what was being drawn during the year. June was an atypical month, and it was known that there would be a slowdown in production due to

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the World Cup,” said IABr’s president, Marco Lopes. In Brazil, most companies paused works during the games of the country’s soccer team. Finished, flat and long steel production decreased 16.4 percent in June, year-on-year, and 4.5 percent in the first half of the year. Flat steel production fell by 13 percent in June to 1.1 million mt, year-on-year, while long steel production diminished 20.9 percent in the same period to 790,500 mt, IABr said.

Gerdau’s new $60 million caster at Minnesota plant near completion A $60 million project to replace the continuous caster at Gerdau’s steel mill in St. Paul, Minnesota, is nearing completion, the company announced in late August. Hot commissioning of the new, four-strand Danieli billet caster began this month and it is expected to reach full production by fourth quarter. e St. Paul mill produces various hot rolled rounds for industries including construction, forging, mining, farm equipment and wind power. e new caster will add aluminum grain refining capabilities and allow for the production of more specialty carbon, alloy and high-strength low-alloy (HSLA) steels used across many diﬀerent industries. Other features include 100 percent submerged nozzle casting, hydraulic oscillators for improved surface quality, and three-point unbending to prevent cracking. e company also entered into an agreement with Xcel Energy that will help to enable the operations to remain competitive in the future. e agreement was reviewed by the Minnesota Department of Commerce and approved by the Minnesota Public Utilities Commission.

Port of Houston sees record steel shipments in July More steel moved across the Port of Houston’s docks in July than any month since 2008, Executive Director Roger Guenther reported at the August 26 meeting of the Port Commission of the Port of Houston Authority. Guenther also noted that PHA has Volume 7; Issue 4

achieved a record, with operating revenues in July 2014 of more than $24 million. Steel and bulk cargo support a solid 5 percent growth in tonnage, he said. More than 22 million tons of cargo moved across Port Authority docks during the first seven months. e month of July also recorded the highest tonnage in steel since 2008, 844,000 tons. Container volume was relatively flat compared to last year, but has seen a 4 percent increase in the number of loaded boxes year to date. is was oﬀset by a reduced number of empty containers being imported through PHA terminals due to an increase in loaded imports.

Brazilian court backs Vale in tax dispute Brazilian miner Vale has been freed from paying taxes on profits made overseas, according to a report in early September. is is expected to provide an opportunity for Vale to demand a $10 billion refund on a settlement payment. According to media reports, Vale always claimed that it had already paid taxes on its profits abroad and should be exempt from taxes in Brazil. In April, Brazil’s Superior Justice Tribunal, the last court of appeal before the Supreme Court, ruled in favor of Vale regarding foreign taxes. As SteelOrbis previously reported, in November 2013 Vale agreed to pay R$22.3 billion ($9.9 billion) to the Brazilian government to settle a 10 year-long tax dispute.

Venezuela prohibits steel exports Venezuela has been preventing its domestic market from exporting steel to other countries, news reports said in early September. e country’s export association (Avex) sees the government’s move as a worrying factor. In the last months, Venezuela has seen a recovery on exports from private companies, reports said, but government measures, such as the prohibition to export steel, iron and other products, can slow down Venezuelan sales. According to Avex, the export steel market, among other segments, has been contributing to the growth of the country. About 50 percent of Venezuelan exports include steel, iron and aluminum. Major destinations are the European Union, Brazil and Central America. SO \

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Steel News

$115 billion. With facilities in several provinces, Canada’s steel producers directly employ some 20,000 people and create an additional 100,000 spin-oﬀ jobs. Annual shipments total $13-$14 billion, with approximately $7 billion annually in exports. e industry purchases more than $9 billion of goods and services in Canada.

MarketAnalysis

Summer uncertaintycools into fallfirming

Can the global steel industry make a final firming push to close out the second half of 2014 with a bang?

RAWMATERIALS

Early summer vacillating turns upward for US scrap market In early June, US domestic scrap prices in most regions of the US trended down by approximately $10/lt. At that point, scrap flow into the yards had definitely increased from levels seen one month prior, according to sources, which is typical for the early summer months. Transportation and logistics, however, continued to be a problem; many yards were having a hard time securing trucks to deliver scrap to US mills. Prices for the rest of the month were forecast to trend stable, although additional softening was expected to take place for July. Yet as the month progressed, the predictions as to where prices would settle in for July buys were all over the map. In early June, market players became much more optimistic after many regions did not trend down nearly as much as they’d expected. ose who thought the market would be down $20/lt found prices trended down by $10/lt; those who expected down $10/lt found themselves in a down $5/lt situation. Once that happened, many felt that if the market hadn’t bottomed out, it would reach bottom soon. But just two weeks later, opin-

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ions were increasingly divided. Some thought the US domestic market would show great signs of strength and could settle up as much as $20/lt. Others felt the market would need to come down $50/lt to bring scrap more in line with iron ore pricing. And then there was the “middle ground” camp, who were of the belief that July would trend at strong sideways, with the idea that prices would fluctuate slightly in either direction depending on the city and region of the US those transactions were taking place. e final numbers didn’t become clear until the middle of the month, though, as very little activity took place during the first week of July due the Fourth of July holiday celebration. At that point, prices had mostly held on par with levels seen during the prior month, although busheling scrap prices in the East Coast Philadelphia region trended up by about $5/lt due to short supplies. In the Ohio Valley, shredded scrap prices trended down by about $10/lt, according to sources, who felt the market seemed to be in relative balance. As the month progressed, many believed the sideways trend would continue through August, and one Midwest dealer was quoted

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as saying the market was “pretty boring”. Although some mills were coming into the market, others weren’t buying at all, he said, which was helping to keep things level. Flow into the yards was described as being decent and there was quite a bit of inventory to be had. Market players, however, were hopeful the reopening of the Warren Steel Holdings mill would help increase demand in the Ohio area. When August buys took place, prices in the East Coast / Philadelphia area held steady. A similar trend was seen in the Pittsburgh/Cleveland area. What was interesting, however, is that export yards had once again started to pursue orders from Turkish mills, which had them buying more scrap from collectors. It was further believed that if the export yards got aggressive with their buying prices that domestic yards would need to pay higher prices in order to maintain incoming flow, which could mean US mills would also need to pay higher prices to obtain scrap. Activity within the US domestic scrap market was relatively quiet ahead of the Labor Day holiday weekend, but activity within the US domestic steel industry was expected move at full speed ahead for the rest of September. At this point, the previously anticipated “strong sideways” trend for the East Coast / Philadelphia region was expected to hold, with September buys taking place between $5-$10/lt higher that last month’s transaction ranges of $330-$340/lt for HMS I/II, $365-$370/lt for shredded scrap and $390-$395/lt for busheling scrap. A similar trend was expected to unfold in the Ohio Valley (Pittsburgh/Cleveland) area, where it was believed that September buys taking place between $5-$10/lt higher that last month’s transaction ranges of $360$370/lt for HMS I/II, $390-$400/lt for shredded scrap and $420-$430/lt for busheling scrap.

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Brazilian pig iron prices diverge between grades e average FOB export price for Brazilian pig iron producers declined by 7 percent in June to $397/mt; exports of the steelmaking grade product averaged at $391/mt FOB Brazilian port, while foundry grade exports reached $447/mt. A pig iron producer from Minas Gerais told SteelOrbis in early July that it had production sold for the next four months and prices were roughly stable for exports, with the last deal closed for the steelmaking grade at $384/mt FOB Brazilian port and $450/mt for the foundry grade. Independent pig iron producers in Brazil have an estimated combined capacity of 10 million mt per year, but are operating at a rate of 50-60 percent. Further in July, deals for export of the nodular foundry grade product were closed at $455/mt and $465/mt, FOB Brazilian port, against $450/mt closed less than one month ago. For the steelmaking grade product, the reference price remains in the $384/mt range. Sources added that although the demand remained strong for the higher quality

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foundry grade product, the same could not be said about the steelmaking grade product, which suﬀered from the poor performance associated to the steel industry. In the Brazilian domestic market, meanwhile, the foundry grade product was sold at BRL 1,270-1,280/mt FOB, ex-value added tax (US$571-$576/mt) in mid-July. By the end of July, export pig iron prices faced a sharp fall, with the steelmaking grade product sold at $350/mt, FOB conditions, comparable to $384/mt last month. According to the source, the downturn reflected chiefly reduced demand from the steel industry in the local and foreign markets. Another producer in Minas Gerais, dedicated to the steelmaking grade, confirmed to SteelOrbis that the price for the steelmaking grade product was moving down, but his last sale was still closed FOB at BRL850/mt, the equivalent to $375/mt, adding that the company was already considering idling its only blast furnace due to lack of profitability. But for the foundry grade product, export FOB prices remained stable in the $455/mt to $465/mt range, while the price in the domestic market, also stable, remained in the $571/mt to $576/mt range. In early August, deals for the steelmaking grade product were closed at $350/mt FOB, reflecting reduced demand from the steel industry, while for the price of the foundry grade the price is in the $455-$465/mt FOB range. In the domestic market, the foundry grade product remains sold FOB in the $571/mt to $576/mt range, FOB, excluding IPI. By the end of August/early September, a major pig iron producer in the Brazilian southeastern state of Minas Gerais was exporting the foundry grade product at $455/mt to $465/mt, FOB port without taxes but Including Pis/Cofins, the same range of one month ago, sources told SteelOrbis, adding that so far in the year it is selling 70 percent of its production abroad, a ratio tending to 80 percent in the last month, comparable to a 50/50 historical average. Sources blame reduced demand from all domestic industrial sectors for the downturn in local sales, reflecting the lackluster performance of the country’s economy. e few Volume 7; Issue 4

tons sold locally were destined to the foundry industries in the southern state of Santa Catarina, which usually feed the auto and civil construction industries. Meanwhile, the steelmaking grade product in the domestic market was sold at that time at BRL840/mt ($374/mt), FOB, no taxes, but including PIS-Cofins, an industry source told SteelOrbis. For export, the last sale of the company was closed at $420/mt, CFR US port in the Eastern coast, roughly equivalent to $380/mt FOB Brazilian port, against $384/mt one month before.

Turkish mills hold off on scrap buys in August Turkish mills and Black Sea scrap suppliers were in wait-and-see mode in the 34th week of the year. According to market sources, Turkish steelmakers and scrap suppliers in the Black Sea region who gave offers to Turkey preferred to wait and watch the trends of the global scrap and finished steel markets. us, not many ex-Black Sea scrap bookings were concluded in the Turkish import scrap market and only a few offers were available in the week in question from the Black Sea region. As of August 26, Turkish mills looked reluctant to book new scrap deals given their sufficient inventories. No import scrap deal for September shipment had been heard from the US in the Turkish scrap market until the given date. Market sources reported that Turkish steelmakers completed their scrap purchases for September deliveries and they were waiting to see whether their increased finished steel prices, which were revised upwards in line with scrap prices, would gain acceptance or not. ere were still scrap cargos available in the market. Toward the very end of August SteelOrbis learned from market sources that in Turkey’s Aliaga region—the only region in Turkey where ship scrapping was allowed—ship scrap prices remained unchanged over the past week at $388/mt ex-yard. Chinese raw materials market remains bearish in late summer During the week ending August 21, prices of imported iron ore in China mostly

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MarketAnalysis

Brazilian exports of scrap likely to increase A major scrap exporter told SteelOrbis in late August that HMS scrap exports were expected to increase in Brazil in the near term if prices remain stable. “Brazilian exports of HMS scrap increased within the last two months as a result of a weaker domestic demand,” the Sao Paulo-based exporter said, adding about 2025 percent of the nation’s production is being directed to the global market. HMS scrap was exported around that time in a $650-$670/mt FOB price range, and as domestic demand slowed down, more heavy scrap was expected to be sold overseas. According to sources, a few months prior, up to 95 percent of Brazil scrap production was sold within the domestic market. Further, sources said that Brazilian steel mills had seen diminished sales and domestic demand for scrap. If prices remain the same, heavy scrap exports would likely increase. $1 = BRL 2.24

MarketAnalysis

indicated slight downticks, while at the same time traders’ offers of domestic production iron ore in Tangshan and Liaoning remained stable. Transaction activity for domestic iron ore continued to be better than for imported iron ore. During the given week, due to the soft trend of finished steel prices, steelmakers were exerting downward pressure on iron ore prices, resulting in declines in imported iron ore prices. Meanwhile, iron ore futures prices at Dalian Commodity Exchange continued to decrease, contributing to bearish sentiment in the raw materials market while inquiries for imported iron ore started to pick up. During the week ending August 28, prices of imported iron ore in China mostly followed a slight downtrend, while at the same time traders’ offers of domestic production iron ore in Tangshan also indicated a soft trend, though traders’ offers of domestic production iron ore in Liaoning Province remained stable. Transaction activity for both domestic iron ore and imported iron ore was slack. As of August 28, quotations of 66 percent iron ore concentrate in Tangshan stood at $103.10/mt and prices of the same material were at $89/mt in Beipiao, both excluding VAT. During the given week, steelmakers were pushing for lower iron ore prices against the backdrop of softer prices for semi-finished and finished steel, while traders agreed to reduce their prices in order to stimulate sales activities. Meanwhile, iron ore futures prices at Dalian Commodity Exchange indicated a large decrease, contributing to poor sentiment in the domestic iron ore market. Declines in imported iron ore prices exerted a negative impact on the market for domestic iron ore, with Chinese iron ore producers slightly reducing their sales prices. For instance, Shandong Jinling Mining Co. lowered its ex-works price for iron ore by RMB 20/mt ($3.25/mt). Moreover, iron ore inventory levels on the steelmakers’ side were at high levels and so steelmakers were less inclined to conclude purchases, also given the tightness of liquidity near the end of the month.

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LONGPRODUCTS

Slow summer for US rebar gets uplift in August e US domestic rebar market was plagued in early July with uncertainty about that month’s scrap forecasting, which, along with the holiday weekend, stagnated buying activity. Spot prices were still in the range of $34.25-$35.25 cwt. ($685-$705/nt or $755$777/mt) ex-mill, and the upper end of the range was still only viable to the smallest customers/order sizes. Meanwhile, although some rebar import oﬀers from Turkey to the US have been heard at slightly below the current range of $28.50-$29.50 cwt. ($570-$590/nt or $628$650/mt) DDP loaded truck in US Gulf ports, they were not yet widespread enough to represent an overall shift in prices. Sources told SteelOrbis that the trend for Turkish rebar was still decidedly down, and it would not come as a surprise if Turkish mills continued to chip away at the range. Sources in the US domestic rebar market confirmed that decent demand levels have prevented the import trend from putting too much pressure on spot prices, and without much expectation of a significant demand bump in early fall, rebar buyers in the US were not too inclined to place large-tonnage orders normally required for imports, and were instead sticking with US mills for the time being. After a relatively surprise price increase announcement for US domestic wire rod in July, many in the US longs market wondered if rebar prices would follow suit. Despite

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strong demand, spot prices for US domestic rebar languished in their stagnant range, and sources told SteelOrbis that the market was clamoring for an uptrend. An increase similar to wire rod’s $0.75 cwt. ($15/nt or $17/mt) or slightly less would not find much resistance in the market, sources said, but anything more would reportedly “stall out.” By late July, after Nucor and Gerdau announced a modest $0.50 cwt. ($10/nt or $11/mt) transaction price increase for rebar (effective with all new orders as of July 28), many in the market welcomed the move after several months of price stagnation. However, while spot prices immediately reflected the increase, bringing the range up to approximately $34.75-$35.75 cwt. ($695$715/nt or $766-$788/mt) ex-mill, not everyone was optimistic about the move. Sources told SteelOrbis that even though import arrivals in July came in at about half of June totals, another surge was expected by September, and some would rather have continued price stability than a short-term upswing. In early August, a slight upswing in order activity in the US import rebar market reportedly encouraged US traders to translate higher rebar prices from Turkey on the CFR level to offer prices in the US. Offer prices increased only marginally, by about $0.50 cwt. ($10/nt or $11/mt), but the trend was expected to continue, lifting offers gradually higher than the new range of $28.75-$29.75 cwt. ($575-$595/nt or $634-$656/mt) DDP loaded truck in US Gulf ports. According to sources, the increase in demand was partially due to predictions that September’s final ruling in the trade case against

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range of $35.25-$36.25 cwt. ($705-$725/nt or $777-$799/mt) ex-mill. Meanwhile, the import rebar market braced for the final determinations in the trade case against Turkey and Mexico. e general consensus was that Turkey’s margins would be much higher than the preliminary determinations, and some traders reported that at least one Turkish mill was starting to offer rebar “duty unpaid”. Traders’ wariness of booking at “open-ended” prices did not affect sales prices in the US quite yet, but they said prices could soon be higher. Although a scrap price uptrend in Turkey in late August would normally be cause for raising rebar offers to the US, traders told SteelOrbis that prices remained “surprisingly steady”, likely as a result of Turkish mills “laying low” ahead of the final trade case ruling against them. Already, the one Turkish mill that was offering rebar “duty unpaid” reversed course and started offering “duty paid” again. As for the US domestic market, spot prices remained firm in late August, and rumors of another modest price increase in September started to swirl before the month began. Sources told SteelOrbis that after the success of US mills’ recent “small bite” strategy of increasing prices, even months without a corresponding uptrend in scrap prices could bring rebar increases based mostly on solid demand. Mexican long prices hit highs and lows on varied construction outlooks In early July, the price of domestic Mexican wire rod increased $30/mt to reach $793/mt ex-mill. Although this represented a relatively significant increase, sources told SteelOrbis that there was no end-use market reason for this growth. “If we consider that housing construction has virtually stopped, the increase in input prices could be the start of an inflationary bubble,” one source said. New rules of construction based on fiscal requirements arrested the homebuilders sector. And the lack of supply of homes raised selling prices an average of 8 percent. However, sources believed this trend could not be sustained. Meanwhile, the price of domestic MexiVolume 7; Issue 4

can rebar plunged $75/mt in the same period to reach $600/mt ex-mill. e significant drop in prices was directly related to the crisis in the Mexican construction sector. Industry sources told SteelOrbis that the “slow execution of public spending is aﬀecting the performance of companies the most in the second quarter of 2014.” By mid-July, the price of domestic Mexican wire rod increased again, this time by $15/mt, to reach $808/mt ex-mill. e price trend was attributed more to “bubble speculation”, according to sources, than true supply and demand in the domestic market. However, rebar prices followed finally, rising $35/mt to reach $635/mt ex-mill. Sources told SteelOrbis that these price fluctuations did not indicate much of a direction. Nevertheless, domestic Mexican wire rod prices fell in late July by $30/mt to $758/mt ex-mill, as the attempt to achieve an increase in prices of wire rod was not well received by customers, which caused mills to reverse course. With major external markets such as the US and Colombia closed to wire rod exports, the market outlook was not encouraging. Moreover, “Chinese imports at prices around US$530/mt to Mexico cause a lot of damage and we require defense against this onslaught,” one industry source said. Mexican rebar prices followed, dropping $35/mt in mid-August to $600/mt ex-mill. Although the price decline was relatively significant, sources said there was “a light at the end of the tunnel” regarding oﬃcial announcements of the construction of 46 new highways in Mexico, comprising 3,000 kilometers (1,864 miles) of roads. Further, “construction has bottomed out and it is expected that during the second half of 2014 it will contribute to the growth of GDP of Mexico,” financial sources said. By late August, wire rod prices in Mexico increased a mere $2/mt to $760/mt ex-mill, whereas rebar prices fell again, by another $40/mt to reach $560/mt ex-mill. Domestic long product prices in Brazil become too high for export Wire rod exports by Brazilian producers reached 16,000 mt in June, reflecting a 14

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Turkey and Mexico would result in much higher margins. Intense political pressure already proved fruitful in the trade case against OCTG, and market players believed the same could happen with rebar. As such, US customers were “getting while the getting’s good”. However, the demand bump for imports did not have any effect on the US domestic rebar market. Some sources thought mills might ride out the success of the recent price increase and announce another increase in the ensuing weeks, for another moderate amount. Turkish rebar offers to the US remained stable in early August, although traders told SteelOrbis that other offshore sources were trying to edge into the market. Rebar from Japan and Spain, for example, already started to hit US ports—US import license data showed that as of August 12, nearly 18,000 mt of rebar arrived from Japan for the month, while just over 13,000 mt of Spanish rebar arrived—both representing significant tonnages compared to low, spotty totals throughout the last year. Of course, arrivals from those two countries combined didn’t come close to Turkey’s month-to-date arrival total of 77,825 mt, the highest level since March--and offer prices from those sources were up to $35/mt more than Turkey’s on the CFR level (depending on US port). But with final determinations in the trade case against Turkey imminent, Japan and Spain might find the playing field quite open in the near future—a good reason to lay the groundwork early. In mid-August, in a rare first-out-of-thegate move, Steel Dynamics, Inc. announced a $1.00 cwt. ($20/nt or $22/mt) price increase for rebar, but within days, other major US mills joined the fray with conflicting increase amounts: Gerdau matched SDI’s $1.00 cwt., while Nucor and CMC undercut them by half, announcing only $0.50 cwt. ($10/nt or $11/mt). However, sources said that in the ensuing days, it had become clear that the lower increase amount had “won the day” and soon, Gerdau quietly told customers they wouldn’t push for the full $1.00 cwt. As such, spot prices for US domestic rebar lifted into the

MarketAnalysis

percent increase from May. FOB average prices were 3 percent lower, at $639/mt FOB, according to the country’s ministry of development, industry and foreign trade. However, sources told SteelOrbis that such prices did not reflect market conditions and were probably related to sales by the local producers to their subsidiaries and associated companies abroad. According to trader sources, wire rod prices of the mesh grade had to be offered at less than $590/mt in early July in order to succeed in finding clients abroad. Further, some Brazilian producers of long products reportedly warnedsteel traders that they would return to the export markets, making available regular tonnages for export via traders, a practice suspended over the last few years. One trader attributed a sharp decline in the domestic demand, reflecting the lackluster performance of the local economy, as the main reason behind the decision to increase exports. Meanwhile, Brazilian rebar import prices were stable at $594/mt FOB in June, but traders told SteelObis that the average price paid for the imported rebar in July remained in line with June. Additonally, in the Brazilian domestic market, the 8mm rebar was sold in a range equivalent to $1,279$1,309/mt to the final consumer in July. By August, wire rod and rebar were still being offered by Brazilian producers to local traders to export, but prices remain a hurdle for closing deals. A trader in Rio de Janeiro told SteelOrbis that mesh-grade wire rod was offered to him at $690/mt ex-mill, but he could not close the deal as the price would need to be at least $100/mt lower to achieve profitability in an export operation. A similar situation occurred with rebar, offered at $730/mt ex-mill, which would require a $120/mt discount to achieve profitability in an export deal. Later in August, export wire rod offers were heard at $590/mt FOB. According to MDIC, imports of rebar in Brazil went up by 25 percent to 32,000 mt in July, at an average FOB price of $616/mt, a 3.5 percent increase since June, reflecting an increased interest for the imported product given the extremely high domestic price when compared to international prices.

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A trader in Sao Paulo told SteelOrbis in August that in the Brazilian domestic market, the 10mm rebar is currently sold by producers to distributors in a range equivalent to $1,098-$1,151/mt CFR terms. e source mentioned that the market is aﬀected by excess oﬀer and prices are currently in a downward trend. Meanwhile, a Rio de Janeiro purchasing manager of a mid-sized construction company told SteelOrbis that they were paying for small to mid-sized tonnages the equivalent to $1,411/mt for the 6.3mm (1/4”) rebar and $1,336/mt for the 8mm rebar, FOB conditions.

Turkish rebar exports move on a stable trend e overall trading volume in the local Turkish rebar market remained low in the last week of August. Traders were trying to sell their stocks, while Turkish producers’ domestic rebar quotations were varying in the range of TRY 1,263-1,280/mt ($585$592/mt) ex-works, excluding VAT. On the other hand in the same week, market sources reported that Turkey’s rebar export offers followed a sideways trend during the week in question at $575-$585/mt FOB. In line with increases in import scrap prices in Turkey, which settled in the range of $385-$386/mt CFR, Turkish steelmakers had revised their export offers in the previous two weeks by $10/mt, with prices moving on a stable trend in the last week of August. In the third week of August, a total of about 40,000 mt of rebar was sold from Turkey to the UAE in the price range of $582-$585/mt CFR, while demand in the UAE market for Turkish rebar was still on the strong side in the last week of August. However, any offers above this range would be considered to be too high for buyers in the UAE. Meanwhile, buyers in Middle East generally hesitated to book new import materials as the summer holiday mood still dominated the market, while Turkish rebar faced competition from aggressive Chinese rebar offers in this region. Nevertheless, buyers in the Middle East were reluctant to conclude deals for Chinese rebar as they found these offers to be not so Volume 7; Issue 4

reliable and as the lead times involved were long. us, new bookings by Middle Eastern buyers were postponed to September, resulting in weaker demand for Turkish materials in the global market in the last week of August. Turkish billet market edges up in August According to market sources as of the last week of August, billet prices in the Turkish domestic market edged up by $10/mt over the past two weeks to $530-$540/mt exworks. Meanwhile, Turkish steelmaker Kardemir h failed to receive any demand for its local billet sales, opened on August 26. Even though demand in the local market is slack, billet prices received support from availability shortages for ready stock materials from mills. On the other hand, the reduced exUkraine billet supply volume for Turkey and reflection of this situation on prices weakened demand for import billet in the local Turkish market. However, CIS billet offers to Turkey were trending sideways from the third week to the last week of August at $525-$535/mt CFR. Ex-CIS billet offers increased by $5/mt on the upper end and are now in the range of $510-$520/mt FOB as of August 27 week. Russian billet suppliers gained an advantage in the export markets due to tight supply from the CIS region with Ukrainian steel producer Metinvest deciding not to accept new orders and experiencing problems with shipments of previously received orders. As of the last week of August, it was reported that in the local Italian market, a few days before the start of the summer production stoppages, domestic producers’ rebar prices were at €445/mt ($587/mt) ex-works. Upon returning from their summer vacations, local producers appeared to be positioned at the same price levels. Nevertheless, according to a source polled by SteelOrbis, transactions were still very few and it was difficult to establish a market price. Chinese longs producers eager to stimulate sales During the week ending August 25, rebar and wire rod prices in the Chinese domestic

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FLATROLLED

US flats prices remain lateral despite increase attempts In early June, prices for US domestic hot rolled coil (HRC) had held steady from levels seen during the last week of May, but the trend was definitely heading in a downward direction as more and more transactions were taking place toward the bottom end of the span. Some attributed this to the downtrend

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in US scrap prices. If scrap prices continued to falter, and HRC lead times fail to creep out, it was believed prices could fall below $32.00 cwt. ($706/mt or $640/nt) much sooner than later. As the month progressed, market players became divided when it came to their opinions of where the market was heading. On one hand, mills were catching up to their order books and were looking to span delivery times back out. On the other hand, US domestic scrap dealers started to feel a bit more positive, saying that if the market hadn’t reached bottom it would get there soon. Spot prices, though, continued to get more and more flexible, with deals as much as $0.50 cwt. ($11/mt or $10/nt) below the most commonly reported range becoming increasingly prevalent. Market players said they would continue to keep a very close eye on US domestic scrap prices. Although the anticipated direction of US scrap pricing for July buys spanned from up $20/lt to down $50/lt depending on who you were talking to, if that market segment holds at strong sideways (as the majority believed it will), that could bode well for HRC. In July, US scrap prices did trend sideways, which led to a three-week long neutral spot price range for HRC. At that point, US Steel announced a $1.25 cwt. ($28/mt or $25/nt) “eﬀective immediately” base pricing price increase on all new flat-rolled spot orders, but the announcement failed to make waves in the market. Other flats mills chose not to follow that lead. Order activity and

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inquiries were described as being decent, and Midwest service center sources said they didn’t expect much to change in the foreseeable future. As the month moved, on, better-than-expected order activity and the possibility of higher prices both upstream and downstream had worked to bump up US domestic hot rolled coil prices by $1.00 cwt. ($22/mt or $20/nt). Toward the end of July, it was rumored that US scrap dealers were looking to push prices up toward the end of the summer; it was further rumored that producers of downstream products such as OCTG may take advantage of the favorable trade ruling and lift prices on that end as well. As such, it was believed an official price increase for HRC in the realm of $1.00 cwt. could be a strong possibility. During the first week of August, though, the market remained lateral. Business was better than expected, according to sources, who said the typical summer slowdown in activity didn’t stall order placement as much as it has in years past. As the month progressed, prices held steady in their previously seen range, although more and more deals were starting to take place at the top end of that span. At that time, California Steel Industries announced it would be rolling out a $1.25 cwt. ($28/mt or $25/nt) price increase for HRC, and one week later, SSAB also tried rolling out a $1.50 cwt. ($33/mt or $30/nt) price increase of their own (although with the approach of the Labor Day holiday and many within the industry taking extra days off to spend time with their families, it was too soon to tell if any of that would be absorbed by the market). Sources close to SteelOrbis pointed out that there were a lot of deals taking place between $10-$20/nt cheaper in the South, and the increase announcement by SSAB may have been an attempt to regain lost ground. Order activity and inquiries during the last week of August were relatively quiet, and the most commonly reported spot price transaction range continued to hold at approximately $33.00-$34.00 cwt. ($727-$750/mt or $660-$680/nt) ex-Midwest mill. In terms of offshore activity, traders said they had also slowed down on their bookings as they don’t want to have hefty tonnages ar-

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market continued to follow a downward movement, while overall transaction activity for both rebar and wire rod remained at poor levels. On August 25, rebar futures contract (1501) oﬀers closed at RMB 2,974/mt ($483/mt) at Shanghai Futures Exchange, down $6/mt compared to the previous week. e source added that the production of rebar at Maraba was running at a pace of 30,000 mt per month, in line with its total capacity of 380,000 mt per month. e Maraba plant operates with integrated technology, using as raw material the sinter feed ore supplied by Vale. In the given week, most domestic steelmakers’ ex-works prices for rebar and wire rod indicated significant downticks, with ex-works wire rod prices in eastern China declining by RMB 100/mt ($16/mt) and ex-works rebar prices in the region decreasing by RMB 50/mt ($8/mt). Inventory of rebar and wire rod on the steelmakers’ side was at high levels, and so mills had to lower their ex-works prices in an eﬀort to stimulate sales.

MarketAnalysis riving before the start of 2015, which would leave them vulnerable to paying an end-ofyear inventory tax.

Mexican flats prices see minor variations with stability on the horizon Mexican HRC prices fell $8/mt in early July to settle at $732/mt ex-mill. While some sources attributed the decline to lower summer demand from automakers in the US, that trend was not expected to last. Investments in automotive plants in Mexico continued to roll in, such as the announcement from BMW that revealed plans for a $1 billion Mexican plant, making the company the latest major automaker to take advantage of the country’s growing industrial base and tariﬀ-free access to the US market. Meanwhile, Mexican domestic cold rolled coil (CRC) prices fell $21/mt in the first week of July to reach $873/mt ex-mill. Two weeks later, prices rebounded by $3/mt, and SteelOrbis sources said that flat steel prices that have seen slight rises will lead to a stabilization of prices throughout the second half of the year, as Mexico positions itself as the sixth largest auto manufacturer in the world, displacing Brazil and South Korea. In late July, Mexican HRC prices increased $2/mt to reach $735/mt, but despite the small uptick, prices were expected to remain overall stable as major consumers of flat steel enthusiastically endorse the comprehensive platform that Mexico oﬀers. By early August, prices had increased another $3/mt, however sources said that there was still a shortage of suppliers that meet the demand of automotive OEMs who recently arrived to the country.

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CRC prices in Mexico at that time dipped slightly, by $2/mt to reach $873/mt. A small variation in prices were generally expected for that time of year, although sources were skeptical that the decline indicated an overall trend when similar products such as hot rolled coil (HRC) saw minor upticks. By late August, HRC prices continued their uptrend with a scant $1/mt increase, with further stability predicted. CRC prices at the time, meanwhile, reversed trend and increased $10/mt to reach $883/mt.

Brazilian flats prices see varying trends between export and domestic markets e average export price for Brazilian HRC for the month of June, $558/mt FOB, reflected a decline of 8 percent compared to May, mostly attributed to the approximately 42,000 mt exported to Asian countries at a price level of $525/mt FOB. Meanwhile, around 29,000 mt were shipped to the US at $582/mt FOB, and 17,000 mt were shipped to other regions in Latin America at $599/mt. “If you want to export to Asia you need to reduce the FOB price to be competitive and compensate for freight costs,” a Rio de Janeiro-based trader told SteelOrbis. By July, the average FOB export price for Brazilian HRC went down by 2 percent to $548/mt, reflecting diversified prices among the exporters, with ArcelorMittal Tubarao at $477/mt and Usiminas at $617/mt. According to a major producer, the exports of July had prices closed two months ago, while the most recent export deals for HRC were closed in the $640/mt to $650/mt range, FOB. Volume 7; Issue 4

As for imports in the Brazilian flats market, imports of HRC and CRC, which went down in June from May by 84 percent to 3,000 mt, and by 67 percent to 30,000 mt, respectively, were set to increase over the next few months, a steel distributor in Sao Paulo told SteelOrbis. e source said that in addition to coils in stock at the country’s ports, the company was maintaining a program of fresh acquisitions at least until October 2014. He added that the last deals closed for imports, C&F conditions, were $600/mt for HRC and $660/mt for CRC. In the Brazilian domestic market, HRC was sold in July by steel producers in the BRL1,6001,700/mt range ($721-766/mt), while CRC was sold in the BRL1,900-2,000/mt ($856$902/mt) range. e premium for the domestic price of the HRC, against the cost of imported similar product after clearing customs, is currently estimated at up to 9 percent. By August, however, despite of the lackluster performance of the country’s economy and reduced demand from end-users of flat steel products, prices of HRC and CRC remained strong in the Brazilian domestic market, a source from a major integrated producer told SteelOrbis. e source added that the entrance of Gerdau in the HRC market, from the recently inaugurated HRC line of its Ouro Branco plant, did not aﬀect the market so far, but he conceded that demand was affected during the first half of the year by the lackluster performance of sectors such as the automotive and white goods industries, although prices are showing resilience. He quoted domestic FOB prices for HRC in the BRL 1,960-1,970/mt range ($873-$894/mt), while for CRC prices are in the BRL 2,160-2,170 range ($969$974/mt). Other sources, meanwhile, indicate that market prices might fall just below these ranges. By late August, HRC prices in the Brazilian export market (base commercial grades) were being closed at $600/mt, FOB port, while the price of CRC was being closed at $700/mt, under the same conditions. Meanwhile, HRC was being sold in the domestic market in late August at the equiv-

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Turkish flats prices trend sideways after holiday As of August 6, after Ramadan, demand in the Turkish hot rolled coil (HRC) market remained unchanged since Ramadan holiday and it continued its weak trend. However, market players stated that overhaul works continued on the main automotive industry and subcontractors side and most of the market players were still on holiday. HRC prices in the Turkish domestic market increased by $5-$10/mt as compared to the pre-holiday period. Increases in HRC prices in the Turkish domestic market were attributed to the stable producers’ prices during the Ramadan holiday and expectations for demand to rise after the holiday. Market sources reported that, demand failed to improve due to continuing annual overhaul works and holiday atmosphere. Additionally, demand for producers’ material was strong and demand in the spot market was expected to increase. Meanwhile, tight availability of hot rolled pickled and oiled coil came to a halt but it continued for HRC products. On the other hand, producers’ prices trended sideways since Ramadan holiday and were still at $590-$600/mt ex-works. Some producers filled their order books for September and started to receive orders for October. Market sources stated that $5/mt of discounts were available during transactions and demand for producers’ HRC was strong. Demand in the Turkish hot rolled coil (HRC) spot market increased in mid-August compared to earlier in the month, though it was still weak. Market players stated that the increase in demand was on the low side due to ongoing overhaul works in the main downstream industries and among subcontractors. Spot

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prices in the Turkish HRC market remained unchanged on weekly basis, while the tightness in availability diminished. On the other hand, local demand for domestic producers’ HRC products was still strong. Producers’ HRC prices were still in the range of $590-$600/mt ex-works for September and October deliveries, while producers were reported to be oﬀering $5/mt discounts depending on buyers and transaction volumes. Market sources reported that buyers were negotiating with producers to conclude deals for at least two months due to expectations of a price increase in the Turkish HRC market. While demand in the Turkish domestic hot rolled coil (HRC) spot market indicated a very slight revival during the week ending on August 26, it was still on the weak side. In the last week of August, transactions were being concluded just in line with needs, as stated by market sources. However, market players were optimistic because the HRC market was about to leave the holiday period behind. Prices in the Turkish domestic HRC spot market trended sideways over the last week in question. On the other hand, demand for Turkish producers’ HRC remained on the strong side. Meanwhile, the HRC list prices of Turkish producers for their domestic market were still in the range of $590-$600/mt exworks as of August 25. Transaction activity sluggish in Chinese flats market During the week ending August 19, hot rolled coil (HRC) prices in the Chinese domestic market indicated small decreases, while transaction activity remained sluggish. During the given week, although HRC inventory in the spot market was not at high levels, domestic HRC prices softened due to the downtrend of prices in the steel futures and raw material markets. Traders were willing to sell at lower prices in order to stimulate transaction activity. During the week ending August 26, hot rolled coil (HRC) prices in the Chinese domestic market continued to follow a downtrend, while transaction activity remained slack. During the given week, the ongoing Volume 7; Issue 4

downtrend in HRC futures prices, the slowdown in purchasing activity by downstream HRC users and the soft trend of raw material prices all contributed to further declines in the domestic HRC market. HRC traders mostly held a pessimistic view of the future prospects for the market. Meanwhile, liquidity in the market was tighter coming towards the end of August.

Weaker sentiment and higher inventory observed in local Indian CRC market Local Indian cold rolled coil (CRC) prices remained stable during the last week of August at INR 49,500/mt ($818/mt) ex-works, amidst dull market conditions with negligible transaction volumes, traders said on ursday, August 28. “Market sentiment has been worsening since the demand revival promised by the new federal government is not in sight. e overall slowdown in manufacturing is persisting and dealers have been unwilling to conclude large transactions,” a Mumbaibased trader said. “Indian CRC exports are also temporarily on hold amid speculation regarding US trade action against flat product imports from Asian producers. is could also put pressure on the current levels of local prices, prompting dealers to delay fresh bookings,” he added. Market sources said that ex-China CRC oﬀered at around $605-610/mt CFR Mumbai have been turned down by importers as inventories at most dealers were at higher levels and as stocks were moving slowly.

Ukrainian slab deals take a breather According to market sources, Ukrainian mining and steel producing group Metinvest was forced to slow down new orders and focus on fulfilling earlier concluded contracts until the situation in eastern Ukraine becomes clearer. At the same time, market sources stated that Metinvest has strong order books for August and September production materials which add some optimism to the desperate situation in the country. Meanwhile, exUkraine slab deals were concluded in Turkey at $500-$505/mt CFR for October shipments according to a market report, posted on SteelOrbis website on August 5. SO \

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alent to $800/mt CFR conditions within Sao Paulo state, roughly stable over the last thirty days. Analysts believed that the country’s price stability for flat products might not last much longer, chiefly due to the reduced demand from the local auto industry, but also reflecting the poor performance of the white products sector.

Antonio Gozzi, president of Italian iron and steel association Federacciai, discusses current concerns in the Italian industry, especially regarding steelmaker Ilva.

Interview

TroublesinTaranto

t the annual meeting of Federacciai back in May, Federacciai president Antonio Gozzi defined Italy as the “most important European country in difficulty,” characterized by economic shrinkage, fall in consumption and investment, delays in essential reforms, etc. However, the difficult economic situation of the country, where the crisis has been the longest since World War II, the Italian steel industry as a whole has held quite strong, with a turnover of more than EUR 34 billion in 2013, accounting for more than 2 percentage points of GDP, more than 70,000 people, a very significant amount of capital expenditures that, in addition to ordinary capex, has seen significant interventions in technological innovation and environmental aids. Recently, Gozzi expanded on his thoughts, noting that within the steel sector there are areas that performed better compared to others, such as those related to the automotive, mechanics, oil and gas industries, while other “less brilliant” areas such as the construction sector, amid a dramatic fall in domestic demand, have had to focus on the export market. According to Gozzi, the main reasons that support the maintenance of the Italian steel industry in this difficult context are as follows: 1) e loyal support of Italian properties, that support in every way their own businesses (often covering losses with their own money) 2) e extraordinary efficiency in the management of costs and facilities by the Italian steel companies, which are probably the first in the world from this point of view 3) e ability of companies to be flexible and able to adapt to different market conditions, also demonstrated in these difficult years and witnessed by exports 4) After years of serious competitive

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gap, the restoration of conditions of energy costs similar to those sustained by other large European industrial countries 5) e major environmental investments made by the steel industry in recent years to bring plants into compliance with European and Italian environmental regulation 6) e professionalism and dedication of all employees, which represent an extraordinary strength for the Italian steel industry 7) e fact that the EAF industry is the largest recycling machine existing in our country e Italian steel industry is therefore a sector of excellence in the national production and, as such, must be supported and protected. In this context, following the path of rationalization and innovation is a necessity. Looking to the future, the major issues on which Federacciai will dedicate in the next two years, with the goal of maintaining the competitiveness of Italian steel, are as follows: 1) Growth in domestic demand. A big country like Italy can’t live only by exports. It is necessary to reactivate investments in infrastructures and to rehabilitate existing buildings. Federacciai judged “great” the proposal of a special plan for intervening on schools sponsored by Italian Prime Minister Matteo Renzi. 2) Energy. It is necessary to restore the balance that laboriously had been reached when the cost of energy for Italian energy intensive companies had been aligned with that sustained by European competitors. e problem is that now the weight of incentives for renewable energy is disproportionately high. At the time, the proposal made by FedVolume 7; Issue 4

eracciai to achieve a single European energy tariﬀ for industrial energy-consumers is proving to be a good solution. 3) Environmental issue. Italian steel companies want to comply with all existing rules and have invested considerable resources over the years to make their plants more and more environmentally friendly. “What we are asking,” said Gozzi “is certainty of the law. We must not deviate from European standards and from the good practices that exist in other EU countries. What worries us is the complexity of our legislation, the continuous overlap of national and regional standards and the unequal treatment from location to location. ere is a pressing need to simplify and standardize.” Gozzi also commented on the case of Taranto-based Italian steel producer Ilva. “Two years of judicial shocks and the wrong attitude by the Italian government has produced the disaster that stands before the eyes of all—that Ilva is going to go bankrupt,” Gozzi stated. “A truth evident to all is that without ownership and a normal governance no firm is able to generate the necessary resources for environmental interventions and the revival of production.” Former special commissioner Enrico Bondi, who was appointed by the Italian government in June 2013, “instead of proposing unlikely business plans, should have quickly rebuilt the normal business manage-

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Italian state will have to accompany the transition process by protecting employment, plant assets and creditors’ rights. e state must not substitute itself for private entrepreneurs - it has to be a guardian and facilitator in rebuilding a team capable of reviving Ilva. e state has to require in Taranto the same environmental safeguards that are required by other European steel industries. e state must also have the courage to adopt positions that are diﬀerent from those of the judges who, with their extreme actions, led to the dramatic situation seen today. “We have been engaged for two years in a battle of principle in defense of the largest—and probably one of the most eﬃcient—steel plant in Europe; a battle in which very often we were alone and had to fight against ignorance, prejudice, exploita-

In June this year, Italian crude steel output decreased by 3.8 percent year on year to 2.112 million metric tons, while in the first six months of the year the output figure amounted to 13.060 million mt, up three percent year on year, according to the figures released by Federacciai. The decrease recorded in June was the third consecutive year-on-year decrease, and the highest after the 3.7 percent decline in April. The output in June of the current year was also lower compared to the crude steel outputs of 2.273 million mt in June 2010, 2.631 million mt in June 2011 and 2.439 million mt in June 2012.

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Volume 7; Issue 4

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Interview

ment, trying to put together a credible corporate structure to be entrusted with the drafting of a business plan and the procurement of financial resources and the necessary guarantees to support the plan itself and the actions planned by the Environmental Integrated Authorization (EIA),” Gozzi said. He went on to state that in one year of management by Enrico Bondi Ilva’s production has plummeted; “e company loses between €60 million and €70 million per month, does not pay suppliers, has lost more than €1 billion of its capital and its commercial policies have caused major disruptions in the market, through the sale of coils at extremely low prices in desperate need to obtain liquidity.” “e reconstruction of a credible hypothesis both on an industrial and financial level,” noted Gozzi, “will take time and the

tion by those who actually wanted to just close Ilva,” Gozzi concluded. In June this year, the Italian government asked ArcelorMittal, the world’s largest steelmaker, to consider investing in or buying Ilva. is was confirmed by ArcelorMittal chairman and CEO Lakshmi Mittal at the annual Steel Success Strategies conference in New York. “We have been invited by the Italian government to look at it. at does not mean that we are going to acquire it,” he said on Tuesday, June 17. Assessing ArcelorMittal’s possible interest in Ilva will be a very long process, with social, political and economic problems making the situation very complex, Mittal said. Representatives of ArcelorMittal, accompanied by Piero Gnudi, the Italian government’s new special commissioner for Ilva, visited the Taranto-based plant a couple of times. Other parties interested in investing in Ilva include the Italian companies Marcegaglia and Arvedi, as well as India-based Jindal Steel & Power. e Franco-Indian steel giant, though, remains in pole position for the acquisition of the largest steelworks in SO \ Europe.

Bull&Gloom

Mr. Gloom: Well my odd, I mean old, friend (sorry about the typo), let’s get up to date, shall we? When we last spoke I was warning you that the economics of our times is exactly like that of the 1930s reaction to the 1929 crash. Print more money, aggressively support your own industry and exports to the expense of everyone else; and that this practice leads to war when nations are pressed to the wall. I was being subtle as to bring you ostriches along slowly. But the bandwagon is gathering steam. Reserve Bank of India Governor Raghuram Rajan says, and I quote an absent friend, “the global economy bears an increasing resemblance to its condition in the 1930s, with advanced economies trying to pull out of the Great Recession at each other’s expense.” Simply put, he concludes, “we are taking a greater chance of having another crash at a time when the world is less capable of bearing the cost.” e problem with our leaders is they want, and they believe that we all want, to be ‘left alone in peace’ and will do anything to stay/buy that course. is seems to spring from some honest aversion to war, or they all want to stay in power and are keeping the peace to that end; a belief that man is really good at heart, even Putin, Assad, et al (all are superbly Chamberlain-esque leadership). I think that we can see that current Western leaders are at best incompetent or maybe even useless patsies in managing such times of crisis as these today in the face of a determined aggressor. Putin is neither. He is old school evil. He is following Hitler’s plan to a T. Like Hitler he annexed Georgia (Anschluss of Austria) and then sparked a crisis in the Ukraine (Sudetenland) under the pretense of his own ethnic people being in danger from civil unrest, when he is the one causing that very unrest to give the pretense to intervention. Now, as of this writing, also like Hitler, he is poised on the border of the Ukraine ready to fully invade. Why does this matter to our discussions? (1) We have a generational sense of “I don’t care what happens out there as long as I am comfortable and can go to the bistro and

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Doomsday on the horizon?

have my coﬀee, or watch my game, in peace. (2) We are all following Europe down the same 1930s road economically, and it leads to another 1938 economically and, therefore, militarily (again, for those that didn’t the last time I mentioned it, look it up) and then to war. For crying out loud, doesn’t anyone read history anymore? Won’t anyone out there stand?

Mr. Bull: Oh Brother, your case is getting more complicated by the day. Either I need to come over every now and then and wake you up from your dreams/nightmares or I will have to get you an endless supply of coffee. We do not live in the 1930s, no matter how much you seem to yearn for it just to prove your point that history is bound to repeat itself. Yes, there are some similarities to the pre-WWII era, but it does not mean that we are going down the same slippery road. e global economy or the US and European economies could be doing better but they are not in full-fledged crisis either. Also, there is no hyper-inflation even though there ought to be based on your antiquated Austrian economic principles. ere is not even inflation. e Europeans are now concerned about stagflation and the US is closer to that than to inflation. At the end of the day, the global economy is still growing. Last I checked it is around three percent even though the Europeans are struggling and the US has not quite regained its full speed yet. Remind me again: what was the growth in the US in Q2? 3.9 percent, you say. What an alarming crisis! Mr. Gloom: No inflation? Have you been out of the house and in a store, any store, lately? Surely you don’t believe the government numbers? Canada put that ideal to bed this summer when they changed their jobs data for July from down 10,000 to up almost 42,000, after the public began screaming. Oops, our mistake! No economic crisis? is isn’t even close. I have read that Germany’s ZEW investor confidence survey came in at 8.6. I repeat, 8.6. Down from over 21, which was far from healthy. France and Italy are in Volume 7; Issue 4

recession with high unemployment (over 40 percent for the young in France). Japanese GDP has dropped about 7 percent on a consumer spending collapse (this is the tip of the iceberg for others’ spending. Japan always leads that parade as the most economically conservative and conscious). Europe’s industrial production also dropped this summer. Australia has its worst employment numbers in 12 years. In the US, retail sales have dropped three months in a row. First quarter GDP dropped 2.9 percent and business output dropped 3.5 percent. Car sales are good, not great, only due to a “subprime” auto lending spree. Does that sound familiar? Remember their last dance with subprime? e US bond market is soaring due to major flight from European anything. And, get this: over half of the US’ growth, meager as it is, has been due to inventory building. Your beloved China has been stealing commodities out of the port warehouses and are now in oﬃcial cover up. ey won’t let anyone in or out to see what is, or isn’t, there. e first suit has been filed over this: $270 million involving Citigroup. is runs to the multiple billions; and by very definition will trigger a liquidity crunch as the commodities were the collateral for multiple loans each. And if that wasn’t enough, many of those were re-hypothecated. Now even the base collateral for the first loan is missing! Imagine the dominos. Speaking of China, they think buy or sell when it behooves them, and if markets move against them, break the contract. ey are importing iron ore again (but not to the extent as previous) as they are still trying to run their steel industry like nothing is wrong or has changed since 2000. ey are caught between running full out and employing people, and not—there is no way that they can produce 800 million tons (80 percent) of the world demand and sell it. at the products don’t have a home is only tangential to their purposes, and more antidumping is coming, I am told. at’s because the regional governments are bucking the federal one. e Federal government gives lip service to shut-

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ting down capacity. But the regional ones have some autonomy and they also are the ones that will pay the front line price of laying oﬀ and the unrest, for which THEY will be held accountable—not the Chinese Feds. ey don’t think like you and I: profit and loss, eﬃciency equals commons sense. e national government very much still has the five-year plan: employ people to control people’s mindset. All of their ‘see through’ cities testify to that. “If you build it, they will come?” Hardly. at mindset is running into the growing 1800s Wild East business model that they have in the south. Stay liquid my friend.

Mr. Bull: I don’t think that a temporary downturn of the Eurozone’s industrial production constitutes a major crisis, especially when the actual contraction is very mild. Industrial production numbers vary greatly from month to month, so I am not very concerned about an under developed snapshot. You forgot to mention that the consumer confidence index in crisis riddled Germany was at 8.9 in July—a seven-year high. e consumer feels good about job stability and income prospects and, consequently, loosens his purse strings. After having been criticized for being too frugal, the German consumer is finally spending money and, as if by magic, inflation has not gone up. e consumer price index in Europe is so low that it is hardly worth mentioning it. e US has an inflation of around 2 percent with some fluctuations for some products. ere is no question about that despite its own sluggishness the US economy is once again outperforming the Eurozone. US housing starts have seen some recent monthly downturns but they are still up compared to a year ago. e economy is (finally) adding jobs and this will be reflected in a stronger second half. By the way, global steel consumption is on track to rise 3.1 percent this year. ere is growth, albeit moderate, just about everywhere despite your conspiracy theory of vanishing commodities in China. Even Japan will bounce back when its own quantitative easing program catches on. All of this will be done without a tangible uptick in inflation. I know the price of my favorite Java has been

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fairly stable. You ought to try it; it will open your eyes to reality. It’s not all that bad.

Mr. Gloom: I have to say that I don’t put much stock in consumer confidence surveys; especially when we can’t view how the question is phrased. In addition, your argument in your last section is all betting on what is to come—the consumer as indicator, steel’s rebound, Japan’s recovery etc. at is known as an argument from silence (actually an argument of “not yet”) and, therefore, not an argument. Now, your point on the Eurozone downturn being mild is perhaps valid, if it were isolated, and if it were mild. But it isn’t either of these. Ask Italy, France, Spain and now Germany. As you concede, there are problems everywhere. And in light of the history of the economics of the 1930s, namely the same approach to that crash as that for the one in 2008, we are seeing only the birth pangs. ese economic actions are the very things that gave rise to Hitler and are likewise doing so to Putin. It is an old saw that all war is economic war. By the way, Putin’s sale of gas to China is to replace his sales to Europe, which he will cancel (there is nothing that Europe can do to stop that now; so they shouldn’t “review” their meager sanctions). What do you think THAT will do to Europe? In the end though, the West has the ultimate hammer. ey can freeze all the Russian oligarchs’ money in their banks…to pay for their increased purchases of coal this winter. Perhaps they will then pressure their leader to relent on the Ukraine and the gas embargo of Europe. I hope so, otherwise it will be a cold winter in more ways than one.

Mr. Bull: e problems that are aﬄicting us now may indeed be somewhat similar than in the late 1930s but it doesn’t have to end the same way. ere are “little” diﬀerences that will make the doomsday scenarios of yours highly unlikely. Countries and their respective economies are a lot closer tied together than they used to be and battling economic crises has become a lot more sophisticated. So, let’s move on already. e US steel industry is doing fairly well because of lower input (i.e. scrap) prices, increased deVolume 7; Issue 4

mand driven by the automotive sector and some well-placed anti-dumping suits. Unfortunately, the latter has become an integral part of today’s steel market. Right now, demand for flat rolled steel is outpacing the domestic US capacity and even imports are doing well. Shipments by steel service centers increased by 6.9 percent in July compared to last year. Year-to-date July shipments were up 5.2 percent over last year. Service centers’ inventories have even marginally increased in July showing the optimism and confidence in a resurgent market. So, please don’t get too depressed. Neither the global economy nor the US one are running on all cylinders; but they are moving forward and that is the good news. e 1930s are so, well, last century.

Mr. Gloom: I have to disagree, once again. Big surprise, huh? e closeness of the economies is precisely why this second recession will come quicker than 1938 as compared to 1929. is one is coming sooner than nine years later, and it will be bigger because the amount of money thrown at the problem is so much bigger. e velocity of money right now already indicates that the birth pangs have begun. Money simply isn’t changing hands. (1) e economies are going nowhere until that changes (2) at velocity is going nowhere because the vast bulk of people are not doing well/better (the world’s bankers are certainly the exception) and they are saving. Like squirrels storing up for the winter early, they are the harbinger. Regarding steel in specific, I disagree there too. e US industry is still 76-78 percent of capacity. at this is acceptable is merely an acceptance of bad being called good. Imports are doing well because indeed the US is still the best market. With this next round of rumored AD and CVD suits, that will change. e US industry will fare better (3-5 percent increase in capacity, depending on the scope of the suits), but those economies in Europe and China that are already in their second and third dip will take another blow: “another crash at a time when the world is less capable of bearing the cost.” Stay liquid. Period. SO \

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Beyond the blacksmith

Q&A with Roger Ferch President

American Institute of Steel Construction (AISC)

Roger Ferch, President of the American Institute of Steel Construction (AISC) discusses the future of steel manufacturing and fabrication with SteelOrbis San Diego.

Much of the optimism in the US domestic OCTG and line pipe markets is discussed in the long-term—projects that are expected to emerge between two and five years out. Is there anything you see in terms of the short term that could have a more immediate effect on market demand? RF: As you mention, the weight standard is the driver on the Ford decision. In construction, weight is not a factor and if it were, steel would still be the material of choice as the weight of a structure designed in steel weighs considerably less than a similar structure from concrete, our closest competitor. e advantages of steel framing in construction are many including being strong and light, adaptable to almost any configuration the designer wants, able to span the long dis-

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What are the newest developments regarding the science of steel, i.e. improving its properties for current end-uses and potential enduses? RF: e improvements available for construction steels are limited and would provide marginal performance benefit. Where we have seen improvement is from the producers being able to stay within tighter limits in the chemical and physical properties providing engineers with a more predictable performance. is has been particularly beneficial for structures designed for seismic loading.

How has steel fabrication advanced in the last few years, in terms of technology and equipment? RF: For decades the steel fabrication industry has worked to provide a more eﬃcient flow of information from the design to the fabrication shop floor. Each year has provided improved software and improved equipment that is beginning to provide a seamless flow of electronic data from the design model to the cutting and drilling of the members and the parts. Many challenges remain and AISC has introduced two initiatives to further this eﬀort towards more productivity. e first, Volume 7; Issue 4

called SteelXML, is being used by fabricators and service centers to improve the way steel is quoted, procured, delivered, and managed. e second is our work to provide a common terminology through data exchange methods and processes for design model, project management, and fabrication machinery software to use. When fully implemented, we will further increase productivity through better interoperability between the many and varied software routines and data exchanges in the material supply and fabrication chains.

We certainly cannot become complacent in this ever-changing world.

Roger Ferch

What major advancements in steel fabrication do you foresee in the next few years? RF: e primary advancement will come from a continuation of industry’s efforts to better communicate the design information seamlessly from the design model to the fabrication floor and finally to the constructed structure. A second advancement from these improvements will be greater labor productivity in the fabrication shop and lower total labor for the construction through improvements in offsite prefabrication and assembly. Many are sounding the alarm about a pending labor shortage in construction and we see the efficient implementation of technology as a solution to this challenge.

Do you think brand-new technologies such a 3-D printing will ever replace “traditional” steel fabrication? RF: is is a great question and one without an answer today. Some of the demonstrations of 3-D printing are very impressive, but to “replace” today’s processes will be a function of the system economics, not just the technology. With the pace of change in all facets of society it is better to be prepared for adapting to a change than to say it will never happen. What factors on the horizon are the most promising for the sustainability of the steel fabrication sector? The most con-

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Interview

tances necessary for convention and sport facilities, recoverable and sustainable. Even with all these attributes, we certainly cannot become complacent in this ever-changing world.

Interview

cerning? RF: As mentioned previously, I am encouraged by how technology is continuing to make steel construction more efficient. And, we are building with a material that is readily available and is made by recycling from prior uses. e most concerning is the failure of the construction economy to recover from the construction collapse in 2010. e market volume fell 62 percent and today we are still 43 percent below the volume of 2006. How would you convince the newest working generation to explore careers in steel construction or manufacturing? RF: Notwithstanding my concern about the current slow recovery and what that will mean for this generation’s careers, I would begin by asking if one enjoyed building things in their youth. If the answer is yes, they will enjoy steel construction or manufacturing. As I reflect back over my career and think about the many and varied opportunities and the pride with which I recall the many buildings built it has been a very rewarding career filled with many challenges and successes. e next generation will definitely see the rewards from integrating cutting-edge technology with an industry with roots back to the blacksmith shop. Aside from promoting careers in steel, what are the other aims of AISC’s support of Steel Day? RF: Steel day is the one-day event each year where the entire industry comes together to both educate and network with our customers, students, and others in the construction industry. is is our fifth year working with our members to encourage architects, engineers, contractors, students, and others to visit a structural steel facility, attend a learning presentation or a networking event. Please join us this year on September 19. How does AISC collaborate with architects and engineers to encourage the use of steel in construction? RF: is is a multi-pronged effort combining our regional staff and our Chicago-based steel solutions center. We have three groups of remote staff strategically located around the country with one group focusing on de-

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FabricationFocus: San Diego Public Library dome: A feat of steel design, engineering and fabrication Not only is the 140-foot-diameter post-tensioned steel-leaved dome the crowning jewel of San Diego’s new Main Public Library downtown, it has already earned national recognition and awards for its architectural achievement. e dome was honored with the 2014 Innovative Design in Engineering and Architecture with Structural Steel awards program (IDEAS2 ), and members of the project team were presented with awards from the American Institute of Steel Construction (AISC) during a ceremony at the library in June. Conducted annually by AISC, the IDEAS 2 awards recognize outstanding achievement in engineering and architecture on structural steel projects across the country. e dome’s project team members included: architects Rob Wellington Quigley Architects and Tucker Sadler; structural engineer Endrestudio; construction engineer Hassett Engineering, Inc.; general contractor Turner Construction; steel fabricator, erector and detailer SME Steel Contractors, Inc. (AISC Member/AISC Certified Fabricator/Advanced Certified Steel Erector); and bender-roller Albina Pipe Bending Company, Inc. (AISC Member). e San Diego Main Public Library Dome was one of three projects in the US to receive the honor, winning the category of projects with budgets less than $15 million—the total cost of the 10-story library reached $185 million. Rising 221 feet above ground level, the dome is believed to be the largest steel posttensioned segmental dome in the world, with more than 3,000 individual steel pieces weighing 285 tons in all. e dome is made up of eight unique truss “ribs” that rise from base to apex in varying heights (from 72 feet to 113 feet) and eight “sail” structures located between the ribs. Sails are oriented in plan with a pinwheel configuration, an effect created by offsetting each of the sails’ vertical leading edges to the outside of the ribs, while the sails’ trailing vertical edges are connected to the inside rib surfaces. Each sail has an external pipe grid that is spherical at the upper part of the dome. However, the spheres are tipped vertically and horizontally so the center of each sail does not coincide with the center of the dome. Unfurled, the largest sail is 123 feet by 53 feet wide and comprised of 175 hollow structural sections (HSS) and 60 cable segments. According to the AISC, the erection process was challenging not only because of the dome’s inconsistent geometry, but also because large curved trusses had to be lifted and erected after their assembly. In addition, the fabricator and erector, SME Steel, expressed the desire to erect the sails in one piece. Each sail was assembled with tubes, cables and intricate parts all welded and bolted on the ground. Due to the curvature of each sail, ground assembly would require temporary racks to support the sail parts. Furthermore, working off of aerial lifts would be both cumbersome and costly. Instead, a temporary ramp was proposed in order to hold the members in place and provide access for the work. e ramp followed, as closely as practicable, the curvature of the sails. e erection crew could then work on the decked platform under much safer conditions. Posts protruded through the deck, where needed, to support the shop‐assemblies that were shipped to the site. “e entire San Diego Main Public Library Dome project team has shown how structural steel can be used to create structures that combine beauty and practicality,” said Roger Ferch, president of AISC. “e result is a structure that serves its library, city and patrons extremely well, while providing an example of what can be achieved when designing and constructing projects with steel.”

Volume 7; Issue 4

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Structural steel framing being erected at the 1.8-million-sq.-ft mixed-use City Point project in Downtown Brooklyn, NY, earlier this year.

cision-makers for building structures, a separate group, the national steel bridge alliance, working with state DOT’s on bridge structures and our recent initiative focused on educating and working with the general contractors. Our solutions center provides both technical assistance by responding to telephone and email inquiries and provides conceptual steel solutions for projects in the design pipeline. ese eﬀorts are then coordinated with our magazine and award programs to showcase eﬃcient and successful structural steel construction.

Recent government bills have greenlighted much-needed infrastructure projects, but many say the US is in desperate need of a long-term investment in improving roads and bridges and government facilities. What are the most significant challenges to this investment, which would be a boon to the steel construction sector? RF: e most recent “green-light” is just another short-term bandage for a national infrastructure that needs a robust and long-term solution. What was once six-year legislation packages has deteriorated to just a series of one to nine month patches for the past six years. While almost everyone admits

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that our existing federal gasoline tax is insufficient to provide the repairs and improvements we need, there is no consensus on how to fix the problem. A fully-funded long term solution would begin to halt our deteriorating highway system and provide the construction industry with a basis for making necessary capital investments in their plants and equipment.

The next generation will definitely see the rewards from integrating cutting-edge technology with an industry with roots back to the blacksmith shop

Roger Ferch

Steel manufacturing still has a strong domestic presence in the US, but regulations and outsourcing has sent much of it overseas in the last few decades. What must be done to bring steel manufacturers back to the US, or on the other side of the coin, encourage foreign steel manufacturers to set up shop in the US? RF: Having participated in the industry for the past four decades, I have watched the ebb and flow of oﬀshore steel materials and fabVolume 7; Issue 4

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Interview

rication cycle from developing country to developing country. e cycle appears to run from a country developing the production capacity before their internal demand and then seek an overseas market in which to “dump.” A few years go by and then they are busy within their own market. I have no doubt that American-produced steel and American-fabricated steel provide the best long term total value to the user, yet often project decisions are made without considering all the factors including the time to obtain the materials and the need for additional inspections. In construction materials, the current import levels are fairly low and were we to have a level playing field in international trade I am confident that we can SO \ maintain this level.

AcerosNoticias

Mexicansteelfor the win

SteelOrbis Americas’ correspondent in Mexico shows how Mexico’s soaring automotive sector is making the nation a steel giant in Latin America.

Barely beating 2013 e Latin American Steel Association (Alacero) said that during the first half of 2014, the crude steel production of Latin America accumulated to 32 million tons, 1 percent more than same period of the previous year, and finished steel production reached 28 million tons, also 1 percent more than January-June 2013. Alacero also reported that the regional production of crude steel between Jan-May 2014 reached 27.1 million tons, up 1 percent to the same period of the previous year. Brazil was the main producer with 14 million tons, 52 percent of the regional output. Additionally, countries that registered the highest production growth rates of crude steel during the first five months year on year were: Argentina (12 percent), Mexico (7 percent) and Peru (5 percent). On the other hand, Venezuela, Chile and Colombia dropped 39 percent, 14 percent and 1 percent, respectively. Meanwhile, during the first five months of this year, Latin America produced 23.4 million tons of finished steel, in line with same period of 2013. Brazil was the main producer with 11 million tons, 45 percent of the regional output. Mexico was second, with 7.3 million tons (31 percent) and grew 12 percent year on year. According to Alacero, other countries that increased their finished steel production in the indicated period were: Colombia (16 percent), Ecuador (1 percent) and Peru (1 percent). Venezuela and Chile dropped 37 percent and23 percent, respectively. e continuous decline of Chilean production was partially blamed on the closure of the flat steel line in CAP S.A.’s Huachipato Plant in 2013. e finished steel segment, Alacero said, refers to steel included in one of these groups: long products (reinforcing bars, bars, wire rod, light sections, heavy sections, rails), flat steel (sheets and coils, coated sheets, prepainted, stainless steel, chrome-plate sheets, hot dip galvanized sheet) and seamless tubes.

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Mexico on a roll In the case of Mexico, which has the highest consumption of laminated steel (with a growth of 12 percent), the World Steel Association said in July that driven by increased global demand and growth of the automotive industry in Mexico, steel production in the country increased 8 percent between January and May this year, with a reported 8 million tons. e results of the first five months of 2014 place Mexico as the country with the highest growth in North America, surpassing the United States, whose production grew 0.7 percent. Altos Hornos de México (AHMSA) recorded crude steel production of 4.14 million tons, up by 7.1 percent year-on-year, said the National Chamber of Iron and Steel

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Industry (CANACERO). In the group’s 2014 annual report, which shows preliminary figures, CANACERO added that ArcelorMittal Mexico’s production increased by 8.1 percent in the same comparison, to 4.02 million tons, to keep its second place ranking in the list. Meanwhile, crude steel output at Ternium México rose by 0.98 percent, to 3.72 million tons. Together, these three steelmakers provided more than 66 percent of Mexico’s total crude steel production in 2013: 23 percent from AHMSA, 22 percent from ArcelorMittal, and 21 percent from Ternium, CANACERO said. In July of last year, AHMSA launched the AHMSA's plant in Monclova, Mexico

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AcerosNoticias

Fénix Project, located in Monclova, Coahuila, which required a total investment of US$2.300 billion, including iron and coal mining and steel plants. e plant will increase the ability of the firm to produce 5 million tons of steel annually, from the current 3.8 million, said the chairman of the company, Alonso Ancira. “We now have increased capacity to supply the plates with the dimensions and qualities that fulfill the requirements of companies like Caterpillar and Trinity Industries for products such as railroad cars or front-loaders.” Alonso Ancira said Steckel Mill Plate, principal of the new steel mills will be a magnet for investment with a capacity to produce 1 million tons of plate extended or rolled steel annually. Additionally, the Steckel plate mill comprises a furnace designed by technicians at AHMSA that has been in operation since 2011, plus an electric arc furnace, a fourth continuous casting machine for slab production, new mines iron and coal, and various units of ancillary services. In July 2014, the steelmaker reported that its total sales amounted to 10.953 billion pesos (US$846 million) in the second quarter and an EBITDA of US$68.8 million, representing 28 percent and 277 percent increase, respectively, against same period in 2013. In the company’s report to the Mexican Stock Exchange (BMV), it said that during the quarter they placed 955,326 tons of steel products and 1,622,819 tons of thermal coal on the market, a 12 percent and 15 percent increase, respectively, compared to the same quarter last year. Techint, which owns Ternium México, TenarisTamsa, and Tecpetrol, has contemplated an expansion of its Pesquería Industrial Center, in Nuevo León state, in order to satisfy the demand for steel that is expected to grow with the arrival of more automotive assembly plants in Mexico. Paolo Rocca, president of Techint Organization, said that center was visited by oﬃcers of the Korean Kia Motors, a subsidiary of Hyundai, to evaluate the supplier of galvanized steel that require special a factory for vehicles in Nuevo Leon. “We are considering a second galvanizing line on the ground with 350,000 tons (production capacity per year)

with an investment of US$300 million,” he said in an interview. e Ternium Industrial Center in Pesquería, Nuevo Leon, is currently producing at a rate of 1.5 million tons per year of cold rolled steel. In the same complex, the Tenigal galvanizing plant, formed through an association between Ternium and Japan’s Nippon Steel, uses these laminates to produce 400,000 tons a year of special steels for the automotive industry. Also, the Tenigal plant features a power plant with a capacity for self-consumption of 940 megawatts, which required an investment of US$1 billion. “At the time in which growth programs in the automotive industry are confirmed, we will have to expand to arrive in time for the supply of this product,” said Rocca. Maximum Vedoya, CEO of Ternium Mexico, said the plant began operating at full capacity in July 2014 and it will serve all automotive OEMs with operations in Mexico. “e Industrial Center Pesquería already operating at 100 percent capacity for both cold rolled and galvanized Tenigal in,” he said. “We are now embarking on this center that is made primarily for the automotive industry, so that it can supply product that is not already made in Mexico.” He noted that the supply of special materials was performed regularly both in the case of cold rolled steel sheet for automotive and galvanized. “e 30 percent of what we sell is already the automotive industry and we hope to start next year means that for the first quarter of 2015,” Vedoya said. “Having 100 percent of galvanized steel for automotive industry is our goal.” According with data of CANACERO at May 2014, the output of finished steel in Mexico during the first five months of this year was 7.264 million tons (a growth of 10.7 percent respecting last year). For flats, the production in the same period was 3.502 million tons (a growth of 12.7 percent year on year). e production of plate registered an increase of 18 percent to 958,016 tons. e production of HRC was 1.236 million tons with an increase of 14.1 percent, CRC production grew 7.8 percent with 1.308 million tons, and HDG production was 845,302 tons with an increase of 19.1 percent year-on-year. SO \ Volume 7; Issue 4

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NewsFocus

Severstal bids farewell to NorthAmerica

t’s no secret that steel producers in the US are not quite satisfied with the rate of economic recovery from the worldwide financial crisis just half a decade ago. But while other mills are focused on investments and acquisitions and other long-term solutions for maximizing profitability, Russia-based OAO Severstal decided streamlining was their best option for continued success, announcing this summer that their North American assets were up for sale. Rumors of a potential sale started to swirl all the way back in midMay—SteelOrbis reported that Severstal was entertaining oﬀers for its Severstal North America division, including steelmaking facilities in Dearborn, Michigan (with an annual capacity of 3.6 million tons per year) and Columbus, Mississippi (3.4 million tons per year). At the time, financial experts believed the sale of those two mills alone could fetch up to $1.5 billion or more, and potential buyers included US Steel Corp. and Brazil’s Companhia Siderurgica Nacional SA (CSN). Just days after initial reports of the potential sale hit the media, OAO Severstal released an oﬃcial response that neither confirmed nor denied the rumors: “Remaining fully committed to maximizing value creation for its shareholders, OAO Severstal announces that it is considering a range of strategic options in relation to Severstal North America. Severstal confirms that no decision has yet been taken as to which, if any, such option might be pursued.” Nevertheless, by late June CSN told media outlets that not only was the company interested in acquiring Severstal’s US assets, but it was already participating in a bidding process to complete the deal, including analyzing the viability of the operations before making a formal acquisition proposal. Other media reports indicated that Severstal said earlier in June that a deal with CSN would

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be an “interesting option” as the company seeks to increase profits and diminish debts. Whether CSN ended up making a formal proposal or had its oﬀer rejected, Severstal announced July 21 that it has entered into “separate definitive transaction agreements” to sell its two US mills to US-based steel producers: Severstal Columbus to Steel Dynam-

ics, Inc. for $1.63 billion; and Severstal Dearborn to AK Steel Corp. for $700 million. “e acquisition of Columbus represents a significant step in the continuation of our growth strategy,” stated SDI’s Chief Executive Oﬃcer, Mark Millett, in a statement. “It leverages our core strengths, and at the same time fulfills our initiatives to further increase value-added product and market diversification. We enthusiastically look forward to welcoming the Columbus employees and customers into the Steel Dynamics family, and working with them to drive future growth and success. “We have been positioning our balance sheet and organizational structure for growth such as this,” continued Millett, “and we believe this acquisition will result in a prudent capital structure that will allow us to again return to our preferred net debt leverage of less than three times trailing EBITDA within a reasonable timeframe. e expected earnings accretion and increased scale make this transaction a meaningful strategic opportuVolume 7; Issue 4

nity for our shareholders and all of our employees.” e acquisitions are expected to be completed by the end of this year, pending antitrust approval and other requirements. In the meantime, Severstal is quietly shedding other US assets, such as PBS Coals, Inc., a Pennsylvania-based metallurgical coal producer. Corsa Coal Corp, a publicallytraded Canadian firm, entered into a definitive agreement in August to acquire PBS Coals for $140 million. Soon after the mill sale announcement, Severstal’s shares on the London Stock Exchange rose over 10 percent, upping the company’s value to over $8 billion to surpass Novolipetsk Steel (NMLK)—Russia’s formerly-highest valued steel producer—for the first time since July 2012. While news reports following the sale of Severstal’s US mills indicated that the company was interested first and foremost in reducing its debts (the company’s total debt at the end of the first quarter of 2014 amounted to $3.55 billion), other news outlets have hinted that Russian steel producers (including but not limited to OAO Severstal) have adopted a new strategy of refocusing their eﬀorts from foreign investments and exports to the Russian domestic market, where the cost of production is much lower and profitability is much higher. Some news sources reported that Evraz, another Russia-based steelmaker with significant North American assets, is planning to conduct an IPO to sell some of them. However, in an earnings conference call in late August, Pavel Tatyanin, senior vice president and head of international business at Evraz, said “We do not have any immediate plans whatsoever with respect to selling a stake in the company. ese are our core assets, and we don’t have any plans to sell the business.” Still, at the end of 2013 Evraz had reportedly accumulated a record-high debt of $6.5

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2,133,966 mt of steel products to the US alone in the first half of 2014, far surpassing 2013’s annual total to the US of 1,683,539 mt. In fact, traders are suspect that Russian steelmakers will ever give up on the US market, even if they’re not actively producing on US soil. If domestic Russian steel demand increased to the point of consuming all of Russia’s production, traders say, mills would simply increase capacity or build more mills to satisfy export demand as well. But that still begs the question of why Russian steelmakers would pull operations

lion, “in stasis” just in case another potential buyer with steel production plans joins the mix. Aside from debt obligations and overall production streamlining, many in the global steel industry are wondering if there are other reasons why Russian steelmakers are withdrawing from North America, and in some cases, Europe as well. Increasing domestic demand in Russia is one answer—analysts have calculated that Russia’s domestic steel industry is increasing around 4 to 5 percent each year, and they speculate that in less than a decade, the market will be large enough to consume Russia’s mill production, removing the country’s need to export steel. at would be quite a feat, US-based traders say, considering how much steel Russia exports already. e country exported

out of resurging economies like the US, which has seen a slow but steady recovery since the economic crisis. Some market players point to political tensions, especially with the US, claiming that Russia is eager to distance itself from US influence as much as economically possible—trade is fine, but US-based facilities are not any longer. Others in the market, meanwhile, point out that Severstal is not the first—and certainly not the last—foreign steelmaker to “try the US market on for size and realize it doesn’t fit.” Speculation aside, most US steel market insiders were pleased with SDI and AK Steel reclaiming what were once American owned and operated steel mills in Michigan and Mississippi, and hope the two companies find a way to make the facilities better than ever. SO \

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Volume 7; Issue 4

NewsFocus

billion, and already, the company is looking to sell oﬀ assets around the world, including its mill in Claymont, Delaware, which has been idled since late 2013. According to local media reports in July, negotiations between Evraz and an unknown potential buyer ended abruptly without success, and while the company is in negotiations with other parties, it is not guaranteed that they plan to operate the property as a steel mill, as the dropped-out buyer planned to. In the meantime, Evraz is keeping the property, which it acquired in 2007 for $564.8 mil-

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WorldEconomicReport

Worldeconomy ends the summer stillstruggling

s we are slowly entering the final lap of 2014, the pace of the global economic expansion has been decidedly uneven. e International Monetary Fund had to revise its forecast for global economic growth down to 3.4 percent from the previous rate of 3.7 percent. It also warned that advanced economies are still being weighed down by high levels of debts. Emerging market growth was cut by 0.2 points to 4.6 percent this year. is is a far cry from the boom days of the BRICS countries (Brazil, Russia, India, China and South Africa which, incongruously, has been added lately). Still, the BRICS countries have fulfilled a year-long promise to themselves and established a joint development bank. It was funded with $100 billion and has its headquarters in Shanghai, and the first president of the new institution is from India. It will compete with the IMF and the World Bank; for some time now, emerging markets have regarded both institutions as too dominated by the US and EU. Americas: After an ice cold—quite literally—first quarter the US recovered nicely in the second quarter, but neither quarter accurately reflects the current economical state. It is neither icy cold nor red hot; it is just lukewarm. is baﬄing picture is evident in the job market. On the one hand, the labor participation rate is stuck at a 36 year low of 62.8 percent and at the lowest rate ever recorded for men. Unemployment, on the other hand, has fallen from 7.5 percent to 6.1 percent in just 12 months. Janet Yellen, head of the Federal Reserve, even sees the inflection point of NAIRU near (non-accelerating inflation rate of unemployment). is is the point at which tight labor markets start to drive up the wage-price spiral. Yellen thinks this point is around 5.4 percent, upon which interest rates will go up again. e latest IMF (International Monetary Fund) projections have the Latin American economy growing by only 2.0 percent on aggregate. e principal reason for this slowdown is the Brazilian economy, which has practically stalled. International institutions and economists are busily revising Brazil’s growth downward in almost monthly intervals. At the same time, the inflation rate is uncomfortably high and if all of that weren’t bad enough, the latest production numbers in car manufacturing show that Mexico has clearly overtaken stumbling Brazil. In the first seven months of this year Mexico’s

export-driven production of automobiles and light trucks jumped 7.5 percent over last year to nearly 1.86 million units. In contrast, Brazil’s output of cars and light trucks fell 17 percent from last year to 1.7 million units. ere are very good reasons for this reversal. In recent years Mexico has been exporting up to 83 percent of its automobile production, mostly to the US. e country undoubtedly benefits from a number of free trade treaties, including the 20-year-old NAFTA. In Brazil, 85 percent of the production is being sold domestically and the Brazilian consumer is highly indebted these days. e biggest export destination is neighboring Argentina which is probably not the market with the greatest purchasing power right now. e car industry represents 20 percent of Mexico’s manufacturing production and 26 percent of its exports. Some economists estimate that economic growth this year will be around 2.6 percent in Mexico or almost double from last year. Steel Production North America YTD July 2014: 70,417mt (+2.1% over previous year) Steel Production South America YTD July 2014: 26,719mt (-1.3%) Total Vehicle Production in Nafta countries July 2014: 1,231,471 units (+20.3%)

GDP – latest quarter compared to previous one and forecast 2014

Consumer Prices

Industrial Production year-on-year

Steel Production YTD July 2014 in mt and compared to last year

United States

+3.9% Q2/+2.0%

+2.0% Jul

+5.0% Jul

51,220 (+1.3%)

Canada

+1.2% Q1/+2.3%

+2.4% Jun

+5.1% May

7,211 (0%)

Mexico

+1.1% Q1/+2.4%

+4.1% Jul

+2.0 Jun

11,255 (+8.0%)

Brazil

+0.7% Q1/+1.0%

+6.5% Jul

-6.9% Jun

19,656 (-1.1%)

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Volume 7; Issue 4

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of this year. Even Germany’s output went down in the second quarter. France’s economy is stalling and Italy has been falling into a triple dip recession. All the while inflation has gone dangerously close to zero. One does not need to be a Nobel economic laureate to figure out that something does not work here. Across the channel, the Bank of England continues its bond buying program and the UK economy has started to grow again. Will the European Central Bank ever take similar measures? Well, there are 18 members to consider…

Steel Production July 2014 year-to-date and compared to last year: European Union (EU 28): 100,690mt (+3.0%) Other Europe: 21,153mt (+0.3%) CIS Countries (6): 63,549mt (+-0%)

GDP-latest quarter compared to previous one and forecast 2014

Consumer Prices

Industrial Production year-on-year

Steel Production YTD July 2014 in mt and compared to last year

Germany

-0.6% Q2/+2.0%

+0.8% Jul

-0.4% Jun

25,933 (+3.9%)

France

-0.1% Q2/+0.6%

+0.5% Jul

-0.4% Jun

9,670 (+3.2%)

Italy

-0.8% Q2/+0.2%

+0.1% Jul

+0.4% Jun

15,099 (+2.1%)

Britain

+3.4% Q2 /+3.1%

+1.6% Jul

+1.2% Jun

7,114 (+5.9%)

Spain

+2.4% Q2/+1.2%

-0.3% Jul

+2.9% Jun

8,472 (+1.6%)

Russia

+0.8% Q2*/+0.2%

+7.4% Jul

+1.6% Jul

41,475 (+2.7%)

Turkey

+4.3% Q1*/+3.0%

+9.3% Jul

+1.4% Jun

19,925 (-0.9%) *Y.O.Y.

Asia: In the second quarter, China’s growth resumed its regular pace of 7.5 percent per annum. On the surface. ere is, however, a very disturbing caveat and it is called a “credit bubble”. Since 2008 China has pushed available credit from $9.0 trillion to $25.0 trillion and the aggregate debt level has reached 251 percent of GDP as of June. Foreign direct investments (FDI) into China declined to $8.6 million in May down from the previous year as well as from April. FDI’s from the European Union declined 22.1 percent in the first five months of 2014 compared to last year. Investments from the US were oﬀ by 9.3 percent. e two most important reasons given by foreign investors were arbitrary application of the law and rising labor costs. On the brighter side, household consumption in China is increasing and has reached 36 percent of GDP. is gives a lot of space to other Asian countries to export consumer goods to China. All told, China’s import market has a volume of $1.95 trillion and is second in volume to the US only. With the shifting economy the import mix has shifted as well. Machinery, machine tools and coal have plateaued. New Zealanders, on the other hand, refer to their milk as “white gold” such is China’s thirst for it. Taiwan with its plethora of con

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sumer goods increased its exports to China 15 percent for the past 12 months as of the end of June. Keeping its commitment to “greener energy” the China inaugurated this summer three huge hydropower stations in the south-western province of Yunnan. e plan is to direct more clean energy to the eastern part of the country that is heavily dependent on fossil fuel energy. Hydropower capacity has been built up rapidly and now accounts for 20 percent of China’s installed power capacity. e consumption of hydropower energy still is in the single digits, but should increase rapidly with the additional capacity joining the power grid. Earlier this year, the Japanese government under Prime Minister Shinzu Abe was lauded for refloating the Japanese deflationary economy. A couple of years ago, the Bank of Japan launched its own quantitative easing program and actively talked the currency down to help exports. e trick worked insofar that Japan’s economy started to grow again. Alas, the virtuous circle did not quite close. Despite a strong demand for labor and a subsequently tight labor market, wages are still dropping. Consumer spending remained lackluster. Add to that an increase in the sales tax and, bingo, consumer spending im-

Volume 7; Issue 4

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WorldEconomicReport

Europe: e heart of Europe’s economy, the Eurozone, is in a state of total mess and mismanagement. Don’t take our word for it; listen to a number of Nobel economists who launched a blistering attack on the Eurozone’s economic strategy during a recent gathering at picturesque Lake Constance. Germany’s chancellor Angela Merkel opened the meeting declaring in so many words that managing a single currency for 18 states was hard. Wirklich, Kanzler Merkel? Isn’t it a little late for this realization? And how about your mantra of austerity? Professor Stiglitz of the US called the austerity policies a “disastrous failure”. He pointed out that there is a risk of a depression lasting many more years, leaving even Japan’s ‘Lost Decade’ in the shade. Stiglitz and others pointed out time and again that authorities in the Eurozone had massively underestimated the contractionary eﬀects of austerity. e recovery of the Eurozone has totally failed over the first half

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ploded causing the GDP to fall a jaw-dropping -6.8 percent in the second quarter. e government took this jolt in stride and de-

cided that no further stimulus was needed at this time.

ASIA SNAPSHOT

GDP – latest quarter compared to previous one and forecast 2014

Consumer Prices

Industrial Production latest twelve months

Steel Production YTD July 2014 in 000 mt and compared to last year

China

+8.2% Q2/+7.5%

+2.3% Jul

+9.0% Jul

480,761 (+2.7%)

Japan

-6.8% Q2/+1.4%

+3.6% Jun

+3.1% Jun

101,224 (+2.6%)

South Korea

+3.4% Q2/+3.8%

+1.6% Jul

+0.6% Jun

64,534 (+0.8%)

Taiwan

+3.9% Q2/+3.2%

+1.8% Jul

+0.6% Jun

13,045 (-0.4%)

Malaysia

+6.4% Q2*/+5.7%

+3.2% Jul

+6.9% Jun

India

+8.0% Q1/+6.0%

+8.0% Jul

+3.4% Jun

47,572 (+1.4%)

Australia

+4.5% Q1/+3.0%

+3.0% Q2

+5.7% Q1

2,687 (-2.8%)

Africa / Middle East: Latest numbers now show what was widely expected: with a nominal GDP of $510 billion, Nigeria is Africa’s largest economy, surpassing South Africa by a hefty $190 billion. Nigeria is expected to grow by 6 percent this year while South Africa remains an economic basket case. After a contraction in Q1, growth in Q2 was barely positive. e economy has essentially stalled and unemployment remains at an intolerable 25.5 percent in Q2. A five-month mining strike in the platinum sector has had a very negative impact.

*Y.O.Y.

Earlier this summer, Saudi Arabia was replaced by the US as the world’s top oil producer. Expansion in Saudi oil production was estimated to be a mere 1.5 percent in Q2. Preliminary numbers for Q1 point to a 4.7 percent annualized growth. e Saudi labor market is in a state of upheaval after mass deportations of illegal foreign workers and more vigilant enforcement of rules that require companies to SO \ employ Saudis rather than expatriates.

SpecialFocus: The global oil and gas exploration gamble anks to new drilling and fracking technologies, the US and indeed the entire globe seems to be awash in oil and gas. Demand for fossil fuels remains strong, particularly in oil-addicted America and hot emerging markets such as China. So, what could go wrong for “Big Oil” and the large number of state owned oil companies and independent exploration companies? Find new fields to explore through diligent work—right? Well, not quite so fast. For one, the cost of extracting oil and natural gas has skyrocketed in the past few years and so have the prospects that the “red hot business model” will be obsolete in just a few years. If you consider global exploration and production over the past six years, the cumulative investment has been $5.4 trillion. at is a lot of money and success is not always a given. ere are constantly rising costs and not every new venture can produce oil and/or gas profitably. Since 2000 upstream costs in the oil industry have gone up threefold while output increased just 14 percent. Not a single large project has come on stream since 2005 at a break-even cost below $80 per barrel. e break-even point for the Canadian tar sand operations can be as high as $100 per barrel, and some of the Artic and deep water projects need prices as high as $120 per barrel. Still, major international oil companies are gambling an aggregate $340 billion in these hostile seas. Some industry reports put the average return on oil and gas exploration at 8.6 percent, lower than it was in 2001 when oil was traded at $27 per barrel. e bad news is that prohibitively high costs are only half of the story, at least for crude oil. e other half is all about alternative or renewable energy sources, such as hydropower, wind power and especially solar power. You can add the much cheaper and cleaner natural gas into this category as well. Crude oil is expensive to extract and taxing on the environment. e switch to powering trucks, buses and even trains with liquefied natural gas (LNG) clearly is on and is most advanced in the US. It is in the solar field, though, that advances are the most dramatic. Photovoltaic energy competes already with oil, diesel and coal in much of Asia without subsidies. Solar power has reached grid parity with residential electricity prices in Germany, Spain, Italy, Portugal, Australia and the US Southwest. Japan will join this list later this year and Korea in 2018. Even the wet isle of Britain, not necessarily known for its abundance of sunshine, will achieve grid parity by 2020. Last year, roughly 30 percent of all electricity capacity added in America came from solar. So, the big switcheroo is on. Big Oil is trapped with expensive technology and an environmentally dirty product. You are still in the mood to invest in oil exploration projects? Caveat emptor!

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Interview

Exports onaroll

SteelOrbis Shanghai speaks with Xu Qian, Overseas Market Manager – Steel International – of SUMEC International Technology Co. about the prospects for Chinese steel trading in H2. SUMEC International Technology Co.’s business scope covers iron and steel, mineral products and coal. What is your opinion the overall performance of the Chinese steel industry in the first six months of this year? Did anything exceed your expectations in H1? XQ: From my prospect of view, the Chinese steel industry in H1 has generally shown a downtrend, with crude steel, long products and flat product prices all moving down. All steelmakers, including large scale and medium scale, have been going through a tough period due to slack domestic demand, with their asset-liability ratio being at high levels. For instance, downstream industries have mostly faced the low capacity utilization problem that is mostly not attributed to planned maintenance. Since sales prices have been lower than ex-works prices, steelmakers chose to run maintenance to lower losses. Meanwhile, iron ore inventory at the ports were at high levels in H1 and iron ore consumption moved slowly, exerting a negative impact on the finished steel market. In addition, demand from downstream industries has continued to be slack, especially the sluggish real estate industry, which has contributed greatly to the weak steel industry. However, the declining trend in domestic finished steel prices and the depreciation of Chinese currency have sped up the recovery of finished steel exports. In the international market, Chinese steel resources have been regarded as very competitive, helping the de-stocking of Chinese production capacity. At the beginning of this year, I did not expect such an improvement in finished steel exports. Which segment of the steel industry had the best performance in H1 for your com-

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pany, and why? XQ: Long products, including rebar and wire rod, grew fast in H1, contributing to the improvement in our company’s profitability in the given period. Moreover, HDG and PPGI products have also seen big increases, mainly due to our eﬀorts in classifying suppliers. For example, once we listed all suppliers’ characteristics, price advantages and product specifications, we could then send the most suitable information to our clients inquiring about specific products. Meanwhile, SUMEC is a large scale stateowned enterprise with financial strength. As we all know, the steel industry is a capital-intensive industry, and no company can achieve positive performance without a solid financial basis. Steelmakers will come to us actively when they build up trusted customer relationships with us in a long term, and give us better prices to enhance our bargaining power.

We are developing markets in the Middle East, South America and Africa to stimulate our export volumes.

Xu Qian

In the last two years, the Chinese steel industry has suffered through difficulties, especially for traders in short of liquidity. How has your company achieved steady earnings in the commodity area? XQ: We have two ways to deal with this problem. First, we try our best to purchase resources from state-owned steelmakers, lowering purchasing risks as far as possible. Volume 7; Issue 4

Second, we purchase raw materials and find factories who focus on forging and rolling to be our processing plants, to decrease risks from advance payment.

According to statistics data, China reported a 20 percent growth in finished steel exports in H1. At the same time, imports have also maintained an increasing trend, and your company has been a significant contributor. Do you have more foreign customers than before? What is their feedback on Chinese products? Compared to the sluggish domestic market, do you think the foreign market will bring more opportunities for your company? XQ: Actually, we have classified the demand and requirements from our clients; for instance, some clients focus on excellent quality, while some clients are sensitive in prices, so we will make diﬀerent strategies toward those clients, providing them various products that meet their requirements. Our clients are very satisfied with our service, and send us many inquiries. In this year, we have eyed significant growth in exports. We planned to achieve an operating volume of finished steel of 5.6 million mt, with 1 million mt exporting to other countries. Currently, we are developing markets in the Middle East, South America and Africa to SO \ stimulate our export volumes. Full interview available on SteelOrbis.com

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FeatureStory

of the

WARMETALS I

t has become commonplace for US steel industry events to hoist up a common enemy each year to vilify, blame, threaten, and otherwise lament. Sometimes it’s a political party or specific policy, sometimes another country (Turkey and China being recent targets), but this year’s Big Bad is something new and surprising: another metal, not usually seen as competition due to its traditionally diﬀerent end-uses. But all it took was one announcement from one of the most major steel end-users in the country, Ford Motor Company, to ruﬄe the industry’s feathers: they planned to start replacing certain steel parts of their best-selling F-150 truck line with aluminum. While some in the industry are worried this is “the beginning of the end,” others didn’t even blink at the announcement. And based on all the available facts and figures, the outcome is likely to fall somewhere in between.

FeatureStory

Origins in crisis In 1975, in the wake of the global oil crisis that caused barrel prices of oil to rise from US$3 to nearly $12, the United States Congress enacted the Corporate Average Fuel Economy (CAFE) regulations. e ultimate goal was simple; improve the average fuel economy of trucks, cars, sport utility vehicles vans and other types of vehicles that were sold in the US. e idea made a lot of sense—if people used less gas, the nation may be able to reduce its dependency on foreign oil. Lawmakers figured they were onto something. Not only would this be good for the environment, but lower demand would also lend itself to common sense economics; they President George W. Bush signed 35 MPG fuel economy standards into law in 2007.

thought it could force the hands of oil producers to decrease their prices. e idea behind CAFE all tied back to “incentivizing” automakers into compliance. ose who played by the new rules (and increased their vehicles’ fuel economy) could avoid financial penalties. On the other hand, if the company’s vehicle sales’ weighted fuel economy fell below the CAFE standard, the manufacturer would not only need to take out their checkbook, they’d need to pay up big. And as it stands, the penalty is equal to $5.50 per 0.1 mpg under the current standard. If you take into account that this figure is then multiplied by the manufacturer’s total production numbers within the domestic market, you could say that car makers have a pretty big incentive to make sure they color

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inside the lines. Fast forward to 2007, when then President George W. Bush signed the Energy Independence and Security Act. is set a 2020 goal for a national fuel economy of 35 MPG or higher; not only would this increase fuel economy standards by 40 percent, it would also save the US billions of gallons of fuel. Baby Steps e requirement didn’t apply to all vehicles, though. e mandates were only for car companies that were manufacturing light trucks and passenger vehicles. en, in 2011 CAFE regulations were newly expressed as a mathematical function, one that was directly correlated to a vehicle’s footprint (as opposed to total weight); vehicles with a larger footprint, such as a Ford Escape, were permitted to have a lesser fuel economy than smaller ones like a Honda Fit. Back then, critics of the change were concerned the switch would have auto manufactures leaning more toward creating larger, bulkier vehicles as a means of avoiding the ever-strict fuel economy standards. On the flip side of that coin, gas prices throughout the United States have been climbing at a steady rate, which has led many consumers to develop greater interest in buying cars and light trucks that cost less to run. Debunking the myths e Environmental Protection Agency (EPA) has long encouraged consumers to buy cars with a greater fuel economy but the National Highway Transportation Security Agency has been just as vocal in firing back, and for good reason. e NHTSA was worried that the mass production of lighter, more fuel economical cars could potentially lead to an increase in Volume 7; Issue 4

car crash fatalities (if you’ve ever stumbled across an accident scene where a sports car got into a collision with an early 90s SUV, you can understand why the agency was so vocal in their concerns). e general, widespread believe was that heavy vehicles provide the greatest protection to passengers, and so manufacturers faced quite the conundrum: one, finding a way to increase overall fuel economy in time to meet the 2020 standards and two, figuring out how in the world they were going to do that while maximizing crash safety ratings. Also in 2011, an even bigger game changer was brought to the table after the

e NHTSA was worried that the mass production of lighter, more fuel economical cars could potentially lead to an increase in car crash fatalities. Obama administration decided to up the ante. Not only did the administration announce plans to further increase fuel efficiency standards, they managed to finalize it one year later, signing legislation that required automakers to increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by Model Year 2025. e move nearly doubled the fuel efficiency of those vehicles compared to new vehicles that were currently on the road. It was also pointed out that the program to improve fuel economy would reduce US oil consumption by 12 billion barrels. The plan If you’ve ever pulled your kids uphill on a sled, you had yourself a real-life lesson in basic physics. Namely, towing your daughter required far less effort than towing your daughter, your son and the neighbor kids from three doors down. e lighter the load, the easier it is to move something from point A to point B; automobile manufacturers realized the easi-

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Steel consumption in the US automotive industry In early June 2014, it was estimated that this year’s auto production levels could be in the 16.8 million units range, with an additional 200,000 added to that figure for 2015. In 2016, that number is expected to climb by 500,000 units with another 300,000 units of growth forecast for 2017. But in July 2012, Ford Motor Company announced plans to build an F-150—the best-selling vehicle not only for Ford, but in all of the US—that would have a mostly aluminum body, a move that would reduce the weight of its most-popular pickup by as much as 700 pounds and would increase its fuel economy by as much as 25 percent. To say steelmakers raised an eyebrow at the development would be the understatement of the century. e new and improved model was unveiled in January 2014, and shortly thereafter, DJ Johnson, Severstal North America’s vice president of quality, advanced engineering and continuous improvement told an Automotive News reporter that his company had missed the mark. “e steel industry has failed,” he said in the article. “We’ve been talking as an industry for years about advanced, high-strength steels but we as an industry haven’t invested in enough capacity to do it.” Sources within US steel industry have said the battle of steel-versus-aluminum has been going on for well over two decades. Steel has long been the dominant player, but now that fuel-economy standards have essentially spiked, aluminum producers have started to take note.

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And while US flats mills are far from crying “the sky is falling”, they’re well aware that car and truck manufacturers account for roughly 20 percent of their annual sales. To put that into further perspective, AK’s newly-acquired Dearborn mill (formerlyowned by Severstal NA) was selling 70 percent of their yearly production to Detroit automakers back when the Russian-based company still owned it. The changing of the tide In the past, the mass use of aluminum in auto production seemed to be reserved for luxury vehicle manufacturers. Audi, for example, has much lower production numbers than a company like Ford, which means all those great discounts that US steelmakers grant based on volume weren’t available to those who churned out a significantly fewer number of annual units; for Audi, the cost diﬀerential from one material to the other was nominal. Although Ford’s switch from steel to aluminum will certainly save them a handful of pennies due to volume discounts, aluminum is still much more expensive than steel, and for today at least, companies like Chrysler and GM have yet to make the switch. Others point out that all automakers will need to cut weight eventually and at some point, Chrysler and GM will need to follow suit. So why did Ford lead the pack? A 2012 Time Magazine article suggests the company’s former CEO had a lot to do with it. Alan Mulally had an extensive background in the airline business before he made the switch to automotive, they said, and since the airlines use quite a bit of aluminum, it’s not surprising that Ford was the first company to begin exploring that option. Mulally retired from the automaker in early July and has been succeeded by Ford chief operating oﬃcer, Mark Fields.

to 62.5 percent while aluminum will increase to 10.5 percent. But is it really possible for aluminum to wrestle iron and steel out of their top auto manufacturer component spot? Many say no. In an August 2012 Pittsburgh Business Times article, US Steel referred to a quote that ran in a 1953 issue of Cars magazine: “e day of the passenger car made primarily of iron and steel is on the wane.” e American Iron and Steel Institute is also among those that refute that belief. Exactly one day after Ford announced it would be moving forward with production of an aluminum-based F150, AISI President and CEO omas Gibson released the following statement. “Our customers are well aware of the automotive steel breakthroughs that oﬀer lowcost and low-risk solutions to meet future CAFE and safety regulations, and they are also aware of the environmental penalties of substituting alternative materials for steel,” he said. ““ese facts give us confidence steel will remain the automotive material of choice.” In a March 2014 Automotive newsletter, IHS Operational Excellence and Risk Management Director of Steel Service, Pricing and Purchasing Jon Anton penned an opinion piece on the matter. Although he did admit his organization doesn’t refute the idea that the use of aluminum in auto manufacturing will continue to rise, they do have their doubts that this will escalate into a full-blown takeover. Can aluminum wrestle steel out of their top-spot in the auto sector?

Metal smack-down In 2010, more than 65 percent of a vehicle’s weight was comprised of iron and steel, with less than 9 percent of the total volume being comprised of aluminum. By next year, the iron and steel percentage will be reduced Volume 7; Issue 4

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est way to make sure they’d meet the ever-increasing MPG standards involved reducing the weight of their vehicles. As such, advanced high strength steels (AHSS) were developed specifically for the automotive industry, promising all the lightweight benefits of other metals, such as aluminum, with the tried-and-true, unbeatable strength of steel. Metallurgists, steelmakers, and automotive engineers worked hand-inhand to get the new steel into cars as soon as possible.

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“ere are several problems in substituting aluminum for steel,” Anton wrote. “First, advances in steel technology mean experimental steels will rival aluminum for weight. Second, automakers are more familiar with steel than aluminum and there is a strong preference to stick with the material they know best. ird, aluminum is about three times more expensive than steel. Finally, there is the question of capacity. e global steel industry today is 35 times the size of the aluminum industry. Aluminum output would have to ramp up massively, with associated equally massive investment, to supply the market.” So what’s the middle ground solution? at’s where advancements in steelmaking technology come in. “Steelmakers recognize the drive for light weighting and have responded strongly and well,” he said. “New metallurgy and finishing techniques are creating steel with the same strength but only 60 percent of the weight. Essentially, the same strength comes from thinner product. is weight reduction moves steel closer towards even par with aluminum.” Ton for ton, however, there will still be some challenges. Anton believes the greatest threat to steel could be steel itself. “In the United States, domestic mills send about 15 million tons of steel to automakers each year; new high-strength steels are expected to weigh only 60 percent as much,” he said, noting that shipments to automakers would fall to about 9 million tons. “It is an open question as to what this means for the health of steel companies. If the new steels are twice as expensive, then revenue would actually be 1.2 times higher (0.6 times 2). If

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the new steels stay the same price, it would be disastrous for mills, as revenue would only be 60 percent of old levels.” A resurgence of AHSS Ford’s switch from steel to aluminum has made waves across the globe, especially for oﬀshore automakers who want to stay competitive in the US domestic market. A July article appearing in Business Korea

Ford’s switch from steel to aluminum has made waves across the globe. talked about how Korean mills such as Hyundai Steel and POSCO are putting a lot of time and energy into developing lighter steel sheets for use in the automotive industry. Recent studies have shown that automakers are becoming more and more interested in using alternative materials, like carbon fiber, magnesium alloys and aluminum as opposed to the “carbon steel standard”; the Korean steel industry is working to make

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sure they’re ready to brace the changing of the tide. POSCO is already developing systems for mass production of advance high strength steels (AHSS). e company has also said they’re even starting to explore a number of diﬀerent AHSS options, such as the use of Twinning-Induced Plasticity (TWIP) steel, which can allow for ease-of-processing when it comes to forming odd and complexlyshaped vehicle parts. Hyundai is taking similar steps. As it stands, the Hyundai LF Sonata is being constructed with about 51 percent high strength steel components, which has the vehicle weighing in at about 64 lbs. less than the YF Sonata, which is made of about 20 percent ultra-high strength steel. Moving forward in the domestic market AHSS alloys come in eight diﬀerent grades, post-formed heat treatable (PFHT), hot formed (HF) boron steels, TWIP, martensitic (MS), Ferrite Bainitic, complex phase (CP), dual phase (DP, and Transformation induced plasticity (TRIP). The Volt’s use of AHSS helped it win Car of the Year

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from primary aluminum, which produces roughly five times more greenhouse gas than does steel production.

AHSS helps provide reductions in manufacturing and driving emissions.

The sustainability question e SMDI points out that life cycle assessments show that making AHSS generates 1/5 fewer emissions than manufacturing other auto body materials, which means that steel-intensive vehicles will continue to be the overall lowest-emitting vehicles on the road. ey also help provide significant reductions in driving emissions, which will help keep the environmentalists happy. Another thing to consider, they said, involves steel being among the most recycled materials on the planet. Recycling of automotive steel can reach over 100 percent, they said, with newer models being continuously designed to be lighter and more fuel economical than their 1950s counterparts. Approximately 90 million tons of steel is recycled each year, they said, which is a statistic that aluminum just can’t compete with. And lastly, due to its physical properties, aluminum isn’t as widely recycled across products, meaning very little automotive sheet can be produced from recycled vehicles. At the end of the day, this means that any increases use of aluminum sheet that’s used for car and truck production will need to come Volume 7; Issue 4

The list goes on e American Iron and Steel Institute (AISI) also feels there’s a laundry list of reasons that automakers will continue to choose steel, the first of which being that steel-made vehicles are cheaper to repair in the event of an accident, which in turn keeps insurance costs affordable for consumers. “AHSS helps automakers achieve their weight reduction goals and, because they require little to no changes in infrastructure, they achieve these goals at a lower manufacturing cost and with a lower total carbon footprint when compared to alternative materials,” they wrote. “Consumers know and trust steel [and] vehicles using AHSS grades increase the overall automaker brand opinion and equity in the minds of consumers. AHSS offers automakers the ability to meet future regulations and return the highest value to their shareholders; material selection is a business case decision, and that’s why the future in this market is great for steel.” So is there an immediate cause for concern, with aluminum emerging as the newest kid on the block? Perhaps. But many within the industry see Ford’s switch as being a temporary change. Yes, aluminum components are a quick-fix in terms of meeting current fuel economy standards, but automakers will continuously look for ways to meet target goals while finding ways to save money. In the short term, steelmakers will need to refocus their efforts to AHSS production if they want to keep market share, and considering one-fifth of the US’ annually-produced steel is purchased by automakers, that’s a pretty big incentive to get their ducks in a row. Basic principles of capitalism dictate that not only will each entity try to make the best product, they’ll try to do it at the cheapest possible price.So for now, aluminum may have a quick leg up, but once US steelmakers really start to rock and roll in AHSS advancements, the automotive industry is sure to SO \ come back knocking.

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In the US at least, DP steels are the most popular of the alloys; it’s being used for things spanning from seat structures to bumper reinforcement components to door beams. In fact, 2009 statistics showed that the every-day, run of the mill North-American produced light truck and/or passenger vehicle contained more than 100lbs of DP steel in addition to 40 lbs of other types of AHSS. In 2010, Motor Trend’s Car of the Year Award congratulated the Chevy Volt for a record use of AHSS in its construction components. More than 70 percent of that vehicle, they said, was produced with these very materials. Not only did this allow for incredible fuel economy, it also allowed for a very high crash safety rating. e 2010 Dodge Ram Heavy Duty also received high marks for its use of AHSS for added strength and durability. Not only did this make the vehicle lighter, it also increased the truck’s average MPG, which made the model especially attractive to would-be buyers. A Steel Market Development Institute (SDMI) Fact Sheet also highlights key advantages of using AHSS as opposed to aluminum. First, recent designs show that lightweight AHSS chassis parts can replace those that are made of aluminum and second, regardless of how you cut it, production of aluminum is still two to three times costlier than steel and the manufacturing and assembly of autos with aluminum is 20 to 30 percent more expensive than steel. Mass reduction using steel can also be achieved at nearly zero cost, while engineering studies have shown that low-density materials (like aluminum) increase cost by at least $2.75 for each pound saved. Steel also provides important safety components that can’t be overlooked. For example, steel parts remain the dominant material for critical zones that are important in managing crash impact, such as passenger compartments along with front and rear “crumple areas”. Studies also show that consumers feel that steel frames and steel side-impact beams both rank in the top three list of which vehicle components protect them most.

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Spanishsteel on the rise

ike many European countries, Spain, with its population of 47 million and ranking as the 13th largest economy in the world in 2013, was hit by the global economic crisis in 2008-2009, which also affected the Spanish steel industry; however, after six years of stagnation, a slow but notable growth can be witnessed in the Spanish steel industry, as stated by the Spanish Association of Steelworks Exporters (SIDEREX). As of 2013, Spain occupied a 16th place rank among importing countries worldwide and 15th place among exporting countries, while 81.5 percent of all of its exported products consisted of industrial goods, including machine tools, aero-generators and automotive manufacturing. Spain is becoming one of the leaders in automotive manufacturing, ranking 10th in the world with an annual turnover of 2.16 million units. A capacity utilization level of 69.9 percent in 2013 allowed Spain to rank 16th among global steel producing countries and 5th among EU steel producing countries in 2013. With all this potential, the Basque region plays the main role in the Spanish steel industry, providing one third of the country’s entire steel production. In particular, liquid steel production by the Basque region in 2013 accounted for 29 percent of overall Spanish liquid steel production, while total steel output capacity in the Basque region was 39.1 percent of Spanish steel production capacity. Spanish production includes both blast furnace and electric arc furnace (EAF) facilities, with EAF mills accounting for the majority share (10.6 million mt in 2013) and

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the remainder produced by blast furnaces (3.1 million mt in 2013). Crude steel production in Spain grew 0.7 percent year on year in 2013, resulting in a total of 13.7 million mt of carbon steel production, while in February 2014 Spanish

crude steel producers reached a total output of 2.30 million mt, 10.6 percent higher than the 2013 February level. Spanish production of stainless steel and special steel totaled 13 million mt and 14 million mt respectively in 2013, maintaining the levels reached in 2012. Flat products accounted for 12 million mt of overall Spanish finished steel production in 2013, while long product output amounted to 8 million mt in the given year. However, total steel exports from Spain in 2013 reached 9.7 million mt in 2013, exceeding the steel import volume of 7.6 million mt for the same year. ese figures compare with exports of 8 million mt and imports of over 14 million mt in 2007. Currently, Spain has enough capacities to produce and cover steel needs in the domestic market, and, following European market Volume 7; Issue 4

trends and demand, is mainly focused on export supplies, mainly to other EU countries as well as to Latin America. e focus on export is a common tendency for Spanish suppliers and it is caused not only by modest demand in the local market, but also by the energy reform in Spain that was initiated by the government in July 2013 and which cancelled subsidies for electricity costs. According to this reform, the costs of electricity have been increased several times, and so higher electricity costs have impacted production costs, and as a result steel prices have become stable at high levels. Taking everything into account, international steel suppliers are interested in the Spanish market and keep stock volumes at their own service and warehousing facilities. For instance, a distributing service center of Tata Steel, Layde Steel, which functions as a warehouse for Tata’s products for distribution in the Spanish market and in the EU, at the same time operates as a processor of narrow cold rolled products. Another notable part of the Spanish steel market is occupied by steel plant equipment producers as well as research and innovation centers, with a total of 75 companies, including ATHADER S.L., JAURE S.A, TALLERES JACO INDUSTRIALS S.L., GLUAL HIDRAULICA S.L., TECNALIA Research and Innovation Center, and INGETEAM POWER TECHNOLOGY S.A. Due to fulfilled capacity potential in the Spanish market, many of these companies are highly focused on export of their services and machines, with exports making up 4585 percent of their sales volumes in total. SO\

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China’s steel growth is gone

he Chinese steel industry in 2000-2013 experienced remarkable growth reflecting: a) the immense growth of steel demand in the country, as adjusted fixed asset investment as a share of GDP soared to about 48 percent from 35 percent in 2000; and b) the incredible array of steel plants and supporting facilities that were built fast and cheap. Chinese steel production in 2014 is forecast at 815 million tonnes versus 129 million tonnes in 2000 – a 14 percent compounded per annum growth rate over this period.

Looking ahead to 2020: • Chinese steel production is forecast at 850 million tonnes, up just 35 million tonnes from 2014. One factor restraining steel production will be a massive decline in new apartment construction in the country. Residential construction activity currently accounts for about 26 percent of reported fixed asset investment in the country. • Effective (real) steelmaking capacity may be about 964 million tonnes. is figure is little changed from the present time as the elimination of marginal plants about offsets the capacity additions. • Capital spending falls back to about $40 billion or less. e figure is still enormous; but, far below $82 billion in 2013 and about $70 billion this year. On a per tonne produced basis, the steel industry’s capital spending by 2020 declines more than 50 percent. • e effective (real) capacity operating rate rises to about 88 percent versus 84 percent in the current year. is report includes forward-looking statements that are based on current expectations about future events and are subject to uncertainties and factors relating to operations and the business environment, all of which are difficult to predict. Although we believe that the expectations reflected in our forward-looking statements are reasonable, they can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including among other things, changes in prices, shifts in demand, variations in supply, movements in international currency, developments in technology, actions by governments and/or other factors. e information contained in this report is based upon or derived from sources that are believed to be reliable; however, no representation is made that such information is accurate or complete in all material respects, and reliance upon such information as the basis for taking any action is neither authorized nor warranted. WSD does not solicit, and avoids receiving, non-public material information from its clients and contacts in the course of its business. e information that we publish in our reports and communicate to our clients is not based on material non-public information. e officers, directors, employees or stockholders of World Steel Dynamics Inc. do not directly or indirectly hold securities of, or that are related to, one or more of the companies that are referred to herein. World Steel Dynamics Inc. may act as a consultant to, and/or sell its subscription services to, one or more of the companies mentioned in this report. Copyright  2014 by World Steel Dynamics Inc. all rights reserved

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Events

LatinAmerica at the podium

With Brazil still representing a top-tier steel industry in Latin America, representatives from all over South America, North America and beyond gathered at the 25th Brazil Steel Congress, hosted by the Brazil Steel Institute (IABr) in Sao Paulo, August 12-13, 2014. IABr releases weak forecast for Brazilian steel Just ahead of the 25th Brazil Steel Congress, the Brazil Steel Institute (IABr) released a weak forecast for the country’s steel market in 2014. According to IABr, Brazil production, sales and consumption will fall this year. Among the systemic factors that will be impacting the industry’s competitiveness are the high and cumulative taxes, the cost of electricity and a strong US dollar. In the global market there’s still an exceeding capacity, which reaches about 600 million metric tons, it said. Exports will remain below average and imports will reach extremely high levels, making the use of the installed capacity remain below 70 percent. IABr said crude steel production is expected to reach 33.3 million mt, down 2.5 percent year on year. Domestic sales should reach 21.7 million mt, down 4.9 percent year on year. According to IABr, Brazil apparent consumption should fall by 4.1 percent year on year to 25.3 million mt.

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Usiminas to increase exports, hopes for stable steel prices Brazil steelmaker Usiminas is forecasting higher exports for the second half of the year, as domestic consumption is expected to decrease, an executive said during the conference, adding that the company hopes steel prices will be stable in the period. “Figures for the second half of the year will be very similar to those we saw in the second quarter of 2014, but exports are expected to increase,” said Usiminas CEO Julian Eguren in the sidelines of the Brazil Steel Congress, which was held from Tuesday to Monday in Sao Paulo, Brazil. Domestic consumption was responsible for up to 91 percent of the company’s sales a few quarters ago, but now those figures should account for only 75 percent of sales. Usiminas net revenues in the second quarter of the year reached BRL3.1 billion ($1.35 billion), as a result of better average prices for Volume 7; Issue 4

steel in the domestic market, compared to the same quarter of 2013. Eguren also said that Usiminas could increase its share of iron ore exports through the Sudeste port, which is owned by MMX, Mubadala and Trafigura (MMX has a 35 percent stake in the project, while Mubadala and Trafigura own the other 65 percent) is expected to be completed by the end of 2014 or the beginning of 2015. e port is located in the city of Itaguai, in the state of Rio de Janeiro, and should have a capacity to transport up to 100 million mt of iron ore. Usiminas plans to expand its iron ore capacity from 8 to 12 million mt. However, to reach that capacity, the company would need to load at the Sudeste port the exceeding volumes of the product. CSN also looking to exports to compensate for weak domestic demand

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According to executives from Companhia Siderurgica Nacional (CSN), the strategy of increasing exports would help steel mills to compensate weak domestic demand, and keep production levels at desirable rates. Benjamim Steinbruch, CEO at CSN, said the external market has been an option for the company to not stop producing. CSN has been using all of its 5 million metric tons (mt) capacity per year to produce steel. For attendees in the congress, Brazil has

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been passing through diﬃcult times, especially when it comes to the steel industry. “We hope we’ll not be cutting prices, because margins are tight,” said Steinbruch.

Slab export prices to stabilize in Brazil From the 2.5 million tons per year of additional capacity derived from the restart of the blast furnace #3 of ArcelorMittal Tubarao, 1 million tons of slabs will be shipped to subsidiaries of the group abroad, while 1.5 million tons will be exported to

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Flat prices will be maintained in Brazil In spite of analysts’ forecasts that the prices of flat steel products in the Brazilian domestic market are set to fall in average by 5 percent until the end of the year, Carlos Jorge Loureiro, president of the country’s steel distributors institute INDA believes that the steel producers will not reduce their prices, maintaining the increases achieved earlier this year, 9 percent in average. “I cannot imagine the steel producers disputing clients by reducing prices, as it would be like shooting their own feet,” Lourerio commented to SteelOrbis during the conference. SO \

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non-related clients. Speaking in the sidelines of the 25th congress of Brazil’s steel institute IABR, a representative of ArcelorMittal told SteelOrbis that the last deals of slabs exports were closed by Tubarao at $560/mt, CFR terms and $500/mt FOB terms, in relative stability in relation to the price deals closed two months ago.Tubarao is returning to its position of top player in the merchant slab market, following the restart of its BF, idled two years ago.

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Hard times ahead for Braziliansteel

SteelOrbis Americas’ correspondent in Brazil highlights the country’s struggles to keep up domestic steel production, sales and consumption at desirable levels.

he Brazilian steel industry is facing diﬃcult times: this is not a complaint from one or two mills, but a consensus that was clearly heard in the panels and sidelines of the Brazil Steel Congress, held in Sao Paulo, Brazil, on August 12-13. “Both our productivity and workforce are weak. e nation’s level of innovation and technology is low. We also have high electricity costs,” Matthew Govier, a managing director at Accenture in Brazil told SteelOrbis. Govier said he’s part of the group of “optimists” who believe the exceeding capacity of steel will decrease globally in the next six years. Pessimists, however, don’t see much change in the coming years. Van Hoey, from McKinsey & Company, says the exceeding capacity of the global steel industry should remain the same in the next decade. “ere are 300 million mt [of steel] that need to be eliminated, and the cost to do this is too high,” said Hoey, adding it would cost $30 billion for the steel industry. According to the World Steel Association, the exceeding capacity of steel worldwide now reaches 600 million mt. “If you were to analyze the shutdown of several mills, especially those which are becoming less and less productive, the number that we’ll reach in the case of a potential cut of capacity would be around 250 million mt. In the next six years, the issue of overcapacity won’t be as bad as it is now,” Govier said. But the exceeding capacity of steel, which has an impact on Brazilian exports, is not the only point of concern for participants. Brazil still struggles to deliver its products through its roads and ports. “Our infrastructure is not good, which increases costs in the country,” added Govier. Some companies like Usiminas are seeing higher exports of iron ore and flat steel. But without a dedicated port, which could make shipment of these products faster and easier,

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the goal will remain unachievable. MMX, Mubadala and Trafigura are building a port in the city of Itaguai, in the state of Rio de Janeiro. MMX has a 35 percent stake in the project, while the other two companies own the other 65 percent. e Sudeste port, as it is known, should have a capacity to transport up to 100 million mt of iron ore. According to the CEO of Usiminas, Julian Eguren, the port is expected to be complete by the end of 2014 or the beginning of 2015. Usiminas plans to expand its iron ore capacity from 8 to 12 million mt. However, to reach that capacity, the company would need to load at the Sudeste port the exceeding volumes of the product. Other executives were asked about a possible interest in the project, including Benjamim Baptista Filho, president at ArcelorMittal in Brazil. “I’m not in touch with Trafigura,” he said, indicating the company does not have, at the moment, any plans in mind regarding the Sudeste port. According to media reports, Gerdau would be another company that could be eyeing to export through the port. Negative forecast Data from IABr made evident why industry leaders are so concerned about the country’s steel industry. According to the trade group, Brazil production, sales and consumption will fall this year. e projection comes with a concern that will be an exceeding capacity of 600 million mt. “Crude steel production is expected to reach 33.3 million metric tonnes (mt), down 2.5 percent, year on year. Domestic sales should reach 21.7 million mt, down 4.9 percent year on year,” said IABr in a statement. Brazil’s apparent consumption (production plus imports minus exports) should fall 4.1 percent year-on-year to 25.3 million mt. Exports are expected to remain below averVolume 7; Issue 4

age, while imports are forecasted to reach extremely high levels. As a result, the use of the installed capacity should remain below 70 percent. According to IABr, some of the factors affecting the segment’s competitiveness are already known. And they include high and cumulative taxes, the cost of electricity and a strong US dollar. In a conference panel that discussed the challenges the nation’s steel industry is facing, Filho said mills are seeking the optimization of processes and cost reduction, as a way to be more competitive and productive. And Brazil, despite the current scenario of “instability”, is seen by the global steel industry as a “potential market for growth.” But that potential has been faded by other factors that are beyond the scope of mills. e action of government to stimulate the industry is one of them. “Some measures by the Brazilian government are needed to the consistent growth of the market and to the increase of domestic consumption of steel,” Filho said. In the view of industry leaders a widespread reform, including a higher spending in infrastructure, lower taxes and a weaker Brazilian real are needed to put Brazil in a more optimistic perspective. All these measures are urgent, but little or no change can be expected soon with the coming presidential election in October. And it is worth noting that 2014 was an atypical year for the country. A major distributor told SteelOrbis that the World Cup “messed up” the domestic industry, as there were prolonged pauses at mills during the games. As a result, mills produced less steel, making demand lose its rhythm. “ere is now a consensus from many industrial sectors that reform is needed to improve the tax system, to simplify and reduce bureaucracy,” Luciano Coutinho, president at the Brazil development bank, said recently

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Alternatives for growth With the weakening of domestic sales, Brazil steelmakers are looking to expand exports. According to executives from companies like Companhia Siderurgica Nacional (CSN) and Usiminas, the strategy of increasing exports would help steel mills to compensate weak domestic demand, and keep production levels at desirable rates. According to Eguren, domestic consumption was responsible for up to 91 percent of the company sales a few quarters ago, but now those figures should account for only 75 percent of sales. Benjamim Steinbruch, CEO at CSN,

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has a similar thinking. He said the external market has been an option for the company to “not stop producing.” CSN has been using all of its 5 million mt capacity per year to produce steel. Similarly, Usiminas is forecasting higher exports for the second half of the year, as doSome Brazilian mills are seeing higher exports of iron ore and flat steel.

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mestic consumption is expected to decrease, Eguren said, adding that the company hopes steel prices will be stable in the period. “Figures for the second half of the year will be very similar to those we saw in the second quarter of 2014, but exports are expected to increase,” said Eguren. If the executive predictions confirm, then Brazil could see a brighter perspective for its steel industry, which has been aﬀected by the low performance of other segments, including the auto, civil construction and machinery and equipment segments. Usiminas net revenues in the second quarter of the year reached BRL3.1 billion (US$1.38 billion), as a result of better average prices for steel in the domestic market, compared to the same quarter of SO \ 2013.

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to a news outlet.

Winnipeg, Manitoba

lthough the Canadian Museum of Human Rights was conceived many years ago, considering the tragic and seemingly escalating attacks on humanity throughout the world ever-present in the daily news, there is no better time for the museum to open than this fall. When the museum was approved by Canada’s Parliament, a government-funded opinion research project produced a list of topics the museum should cover: key milestones in human rights achievements, both in Canada and abroad; current debates about human rights; and instances in which Canada betrayed or supported its commitment toward human rights. In 2003, Friends of the Canadian Museum for Human Rights launched an architectural competition for the museum’s design, welcoming participants from around the world. e winning entry went to Antoine Predock from Albuquerque, New Mexico. In his design, visitors enter the museum through its “roots” before being led through a great hall and a series of vast spaces and ramps. e journey culminates in the 100-meter (328-foot) Tower of Hope, a spire protruding from the museum that provides visitors with an astounding view of downtown Winnipeg. A groundbreaking ceremony was held in December 2008 and oﬃcial construction began in April 2009 and the museum’s inauguration is set for September 29, 2014.While Predock originally intended the structure to be built with concrete, another architect on the building team, Neb Erakovic of Yolles (a CH2M company), told reporters that “as soon as it landed on my desk I knew there was only one way to build it and that was with steel.”

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Other members of the construction team included Smith Carter Architects, general contractor PCL Winnipeg and Walters Group, which handled the detailing and erection in addition to the fabrication. In total, the $350 million museum encompasses 24,155 square meters (79,248 square feet), the equivalent of four football fields, and houses five main levels and three mezzanine levels. e structural construction alone took 44 months: the caissons went in April 2009 and the last of the 18,000 cubic

meters (59,055 cubic feet) of concrete was poured in November 2010. e “mountain” portion of the building consists of five stone clad steel forms in different shapes 18 meters (59 feet) above ground, built in steel W-sections and corner circular hollow sections forming the primary diagrid wall trusses that stretch long distances without support between walls and columns. According to the steel-specific contractors, connecting those diagrids and working with the cantilever details of some sections and the weight of the concrete cladding proved to be among the most challenging parts of construction. Volume 7; Issue 4

For instance, the high loads of the Tower of Hope demanded six 500 mm by 100 mm steel plates to create a solid 500 by 600 mm steel diagrid member. Additionally, the “cloud” part of the structure is glazed and made with 610 mm circular steel pipes with hollow steel columns spanning 30 meters (98 feet). To incorporate and finalize the specifics of the museum’s design, the construction team used 3D visualization and modeling software. Of course, a museum dedicated to human suffering and accomplishment wouldn’t be complete without controversy. In December 2010, arguments erupted over the plans for two permanent gallery spaces in the museum: for the Jewish suffering during the Holocaust and for the injustices experienced by the Aboriginal peoples in Canada. Organizations such as Canadians for Genocide Education and several others protested the elevation of the suffering of one or two communities above all others, leaving any other experiences and issues addressed thematically in the remaining galleries. Other advocacy groups also chimed in to protest about the over-emphasis on the Holocaust, with regard to atrocities. e museum responded by pointing out that there was a misconception about there being only two permanent zones. “ere will in fact be 12 permanent zones and the Holodomor will have a permanent display in the ‘Mass Atrocity’ zone, immediately adjacent to the Holocaust zone,” said a museum spokesperson. “is zone will feature detailed information on the Holodomor and many other mass atrocities that have taken place worldwide and will provide educational opportunities for visitors to learn more about SO \ these events.”

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SteelMarvels

Canadian Museum of Human Rights

SteelSpotlight

SSABmakes the case forAHHS No competition “When it comes to cost eﬃciency, environmental issues and value for money, nothing can compete with advanced high strength steel,” said Kenneth Olsson, an automotive business development senior specialist at SSAB. “e only problem we have today is that our top product could probably use a more sexy image.” SSAB, a world-renowned manufacturer of top class steel sheet, has been supplying the worldwide automotive industry with steel grades that have made cars lighter, safer and stronger for more than 20 years. “Even though there is a lot of media-hype about new, exotic materials for future vehicles, nothing compares to steel when you look at the whole picture,” Olsson said. “Maybe you can produce a car a few kilos lighter with extensive use of carbon fibre reinforced plastic, but what happens when the car is worn out and it is time for recycling? Steel can be recycled to 100 percent and steel scrap is valuable.”

All through the life cycle Advanced high strength steel has its advantages throughout the automotive life cycle, from the manufacturing of the steel, through the mill producing the steel sheet, to punching, bending, welding and assembling the steel parts to a new car. “But it is even more beneficial for the final customer,” Olsson said. “Low weight pays oﬀ in reduced fuel consumption throughout the life span of the vehicle. And if something happens it is easier to repair a car made of high strength steel. All workshops have experience of working with steel compared to cars made of new materials.” Manufacturing eﬃciency is essential within the automotive industry, which has adopted processes such as Lean Production and the Toyota model of production. At the same time, car manufacturers are sensitive to trends among customers.

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Started the high strength steel era In the automotive industry’s early years, customers were overwhelmed with the novelty of the invention and were less concerned about safety demands. It was not until Volvo turned safety into a sales pitch that the ability for a car to absorb and deflect rough treatment became integrated with design. In

Kenneth Olsson, SSAB

some sense, that was the beginning of the high strength steel era in car manufacturing. An overwhelming majority of cars made today use advanced high strength steels to achieve top results in the Euro NCAP crash tests. “ere are other materials such as aluminium or a composite being used on some cars, but advanced high strength steel still is the most cost eﬀective choice to manufacture safe cars,” Olsson noted. is is exemplified in the Future Steel Vehicle (FSV) concept study conducted by the World Steel Association’s automotive group (WorldAutoSteel), of which SSAB is a member. “Car body structures consist more and Volume 7; Issue 4

more of advanced high strength steel,” said Olsson. But it could be much more, as seen in the study.

Lighter than the average car e FSV study gives an example of the weight benefits that can be achieved by using high strength steel. e designers of the concept managed to reduce the weight of a car body with more than 35 percent compared to a baseline vehicle using an internal combustion engine. Reduced weight leads to better fuel efficiency and a reduction of greenhouse gas emissions. e results show that by incorporating FSV’s materials and manufacturing technologies, car companies can avoid pursuing more costly alternatives and complicated multi-material designs to achieve their goals. Advanced high strength steels have been available on the market for more than 20 years. But there are still a lot of cars using a high amount of mild steel grades. “I would say that this is mostly the case in developing countries,” Olsson said. “When price is more important than safety and environmental aspects it is difficult to get paid for the investment in better materials and technique. But steel, particularly advanced high strength steel, is the only material that delivers improved environmental qualities, safety and vehicle performance at little or no cost penalty to the manufacturer. Still, it is obvious that there is more in the media about composites and other exotic materials than about advanced high strength steel. Why?” Tools, knowledge and support at the core It could be that designers hesitate to upgrade from mild to high strength steel because the differences seem too complicated. But there are tools, easy to use and available for free online that can help. WorldAutoSteel has produced the Advanced High-Strength Steel Application Guidelines, bringing together the world’s experience and knowledge on the use of the lat-

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For more information please contact Roger Lidgren, SSAB AMERICAS by email roger.lidgren@ssab.com, and Ursula Egenhofer, SSAB AMERICAS by email ursula.egenhofer@ssab.com SO \

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Myths and truths about high You can’t protect advanced high strength steel from rust. strength steel Advanced high strength steel grades are diﬃcult to cut. In shearing the cut edges of high strength steels are better if the clearances are adapted to the strength and thickness. is though, places more stringent demands on the tool steel. Advanced high strength steel grades are diﬃcult to shape. Harder than mild steel, that is true. But if the designer has advanced high strength steel in mind when designing a new car, modern steel grades can be formed into quite advanced products. Most important is to calculate with the spring back and the lower deep drawing capacity when using advanced high strength steel. is means that the tools must bend the sheet a little bit more, compared to mild steel. But when the angle is correct the final product has all the advantages coming with the better steel, as lower weight and/or increased strength.

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When on the road, a vehicle is exposed to a very aggressive environment. Winter conditions can be awful, when a mix of salt, sand and grit covers the bottom of the car. is used to be a big problem, but not anymore. By extensive use of hot dip or electrogalvanizing technique advanced high strength steel can be delivered with a thin, protecting layer of zinc eﬃciently preventing corrosion. Joining and welding is complicated It is just as easy to weld advanced high strength steel as mild steel grades. In some cases it can be wise to consider welding in other areas, but in general traditional spot welding and laser welding are very good methods for joining these kind of steel grades. Only minor adjustments of the welding parameters will be necessary. Compared to steel parts made by hot stamping the process window for welding is wider when you use cold formable high strength steel.

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SteelSpotlight

est sheet steel technology. e Guideline includes sub-sections on material description, forming and joining of advanced high strength steel. It also adds data, which can be used to compare potential forming parameters, press loads, press energy requirements, and other parameters when switching between diﬀerent steel types and grades. “Technical customer support has always been a core issue at SSAB,” Olsson said. “I would say that this is one of the secrets to why we are so successful on the market. SSAB is a world leading manufacturer of advanced high strength steel. To keep that position we are developing even better high strength steel grades. Our top product can compete with any light weight material and when it comes to overall economy, few can beat us. Our technical customer support is second to none.”

SupplyLines

MERGERS & ACQUISITIONS

While the summer of 2014 proved to be quiet in the mergers and acquisitions arena, a few that ended up making headlines also raised a few eyebrows. Overall, not much more M&A activity is expected for the remainder of the year in the US, but that doesn’t mean both US-based and foreign-owned companies in the US have lost their ability to surprise the market.

Johnstown Wire Technologies acquired by private equity firm Private equity firm Aterian Investment Partners announced in May that one of its aﬃliates had acquired Johnstown Wire Technologies, Inc. Johnstown Wire focuses on customized specialty wire products consisting of cold heading quality, plated, and premium direct-drawn products where metallurgical quality is the diﬀerentiating factor. Walt Robertson, President of Johnstown Wire, said, “is transaction is a significant step in the Company’s history. Aterian is a firm with a demonstrated track record of expanding product development and capabilities, investing in operations, and growing businesses alongside management. Aterian’s support will allow Johnstown to continue to drive results through execution of its strategic plan and its relentless focus on product excellence and customer service.”

Brazil and Argentina sign automotive sector agreement In mid-June, Brazil and Argentina announced an extension on an automotive agreement that aimed to reinforce their bilateral relations, said Brazil’s chamber of foreign trade (Camex). Under the agreement, both countries are expected to jointly build a policy for the auto parts sector, including discussions of new techniques that both countries share in common to strengthen the market. e deal also sets minimum shares of Brazilian and Argentine automobiles in each country. Brazil would need to have a minimum share of 44.3 percent of cars in Argentina, and Argentina an 11 percent share in the Brazil market. Camex did not disclose other details about the agreement, but said the deal was extended from July 1, 2014 to June 30, 2015. TimkenSteel Corp. splits from parent company During the last week of June, TimkenSteel Corp. announced it would oﬃcially become its own entity. e split from its parent company, Timken Co. was announced last September when the board of directors decided that steel operations should spin oﬀ as a separate business. Local news outlets have reported that operations will remain in Canton, Ohio. Company owner Tim Timken said that while he recognizes TimkenSteel Corp. will be a relatively small steel company they are very targeted on growing their business. Former Sparrows Point mill to transfer to new ownership 50

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In mid-July, a federal court filing indicated that arrangements were being made to sell a significant portion of the former Sparrows Point steel mill in Baltimore, Maryland. Court documents stated the sale was being prepared for an unnamed local investment group. e filing was made in conjunction with a federal lawsuit against the current owners of the property, liquidator Hilco and its partner, Environmental Liability Transfer, regarding wastewater being discharged through two pipelines on the property. Hilco and Environmental Liability Transfer bought the property for $72 million in 2012 in a bankruptcy sale.

American Spring Wire Corp. acquires RettCo Steel During the final week of July, Bedford Heights, Ohio-based American Spring Wire Corp. (ASW) announced that the company had acquired the assets of RettCo Steel, LLC (RettCo), located in Newnan, Georgia. RettCo is a manufacturer of PC Strand and has produced these products exclusively for ASW since October of 2011. ASW serves the Texas and Southeast PC Strand markets using products manufactured at ASW’s factory in Houston, Texas, along with the products manufactured at RettCo. ASW has manufactured and sold PC Strand since 1975.

Vale signs cooperation agreement with Japan’s JBIC During the first week of August, Brazilian iron ore producer Vale and the Japan Bank for International Cooperation (JBIC) announced they had signed a memorandum of understanding (MoU) on operational cooperation, according to media reports. e deal would strengthen a long-term partnership between Vale and one of Japan’s leading financial institutions. Under the agreement, both Vale and JBIC will discuss the possibilities of future financing to support the company’s businesses in the areas if iron ore, coal and base metals.

Aceros Carazo acquires Costa Rican distributor Aceros Carazo announced in late August that it acquired Reimers Industrial, allowing the company to incorporate a new business category—equipment and industrial machinery—and also promote the growth of Reimers, through its main line SKF bearings. e first year of the merger should see a sales increase of 30 percent along lines that complement the company’s current product oﬀering.

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SupplyLines

CAPACITY UPDATES

More expansions than idling in Americas steel market over the summer seemed to indicate a corresponding increase in demand, rather than adding to global overcapacity concerns. Most of the increasing capacity was in Mexico, where the automotive industry is flourishing.

Gerdau Corsa opens $600 million semi-finished and structural mill in Mexico Brazil-based Gerdau Corsa opened a new mill in Ciudad Sahagún, Hidalgo, Mexico with an investment of US$600 million. e company said the facility would be fully operational by August and will have an annual installed capacity of one million tons of semi-finished products and 700,000 tons of structural steel. Renato Silva, director of Gerdau Corsa in Mexico, explained that the Company intends to supply domestic demand in the construction sector. “Reforms give the opportunity to expand and encourage the investment of foreign capital, so that positively impact their economic and social position compared to other countries,” he said, referencing the recent spate of energy reform in Mexico. e executive also highlighted that Brazil and Mexico are the main consumers of steel in the Latin American region, with consumption levels at 24.6 million tons per year and 17.1 million tons, respectively.

US Steel to idle two tubing plants in August During the first week of June, United States Steel Corporation announced that it will indefinitely idle two tubular manufacturing facilities in McKeesport, Pennsylvania, and Bellville, Texas, in early August, impacting approximately 260 employees as a result of business conditions which are influenced by unfairly traded tubular products imported into the United States. e indefinite idling of these loss-making operations will reduce the number of US Steel’s tubular facilities from 10 to eight, but will enable the company to operate more profitably as it repositions to meet future customer demand. Approximately 45 professional and management employees and 215 represented employees were advised of the upcoming idling and resulting job reductions and are being issued notices under the Worker Adjustment and Retraining Notification (WARN) Act. US Steel will continue to produce and finish tubular products at its facilities in Alabama, Arkansas, Ohio and Texas where it employs approximately 2,900 employees. Sipar to invest US$184 million in new Argentinian mill During the last week of June, steel producer Sipar, a subsidiary of Gerdau, announced that they will invest over US$184.34 million in the construction of a new production plant on the border between the towns of Perez and Zavalla, west of Rosario, Argentina.

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e new plant will begin operations in 2016 and the scrap dealers in the region will be the main suppliers of raw materials to the Company, which will significantly increase its capacity. e company also announced that the new venture will generate 100 new jobs directly and another 500 indirectly. e new facility will be located on land that the Brazilian group acquired in 2006.

Big River Steel one step closer to Arkansas mill groundbreaking In early July, River Steel announced the latest step forward in constructing its Arkansas mill, closing on necessary financing to start construction on the $1.3 billion facility. A formal groundbreaking ceremony was scheduled for later in the summer, they said, and construction is expected to take two years. “It’s truly been a team eﬀort between our investors, local and state leadership, our management team, and many others to get to this point,” said John Correnti, Big River CEO. “I know firsthand northeast Arkansas has everything we need to operate a world-class mill. Now it’s time to get to work.” “e economic impact Big River Steel will have on the state of Arkansas is tremendous,” said Grant Tennille, executive director of the Arkansas Economic Development Commission. “In addition to the benefits of Big River alone, we fully expect a significant number of suppliers to locate operations in the region. We appreciate the Arkansas Development Finance Authority and Arkansas Teacher Retirement System working hard to make this project possible.” AK Steel blast furnace shut down again On July 31, according to local reports, AK Steel’s blast furnace in Ashland, Kentucky was shut down, marking the second idle of the year. “AK Steel recently experienced an unplanned stoppage at its Ashland Works (KY) blast furnace,” AK Steel spokesman Mike Wallner to local news. “e company is working to remedy the situation and minimize any potential impact on its customers.”

ArcelorMittal’s Mexican plant expects annual crude steel output of 4 million mt During the last week of July, ArcelorMittal’s Lázaro Cárdenas steel plant said they expect to close 2014 with a production of about 4 million tons of crude steel, of which about 1.2 million tons will comprise finished products (rebar and wire rod) according to the CEO SO \ of ArcelorMittal Mexico, Víctor Martínez Gutiérrez.

Volume 7; Issue 4

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Steel sculpture honoring England’s Richard III opens at Leicester Cathedral In 2012, the long-lost remains of King Richard III of England were finally uncovered under a parking lot in Leicester, and in preparation for his oﬃcial burial next year, London-based architect firm Dallas Pierce Quintero was tasked with installing a memo-

Richard III

rial steel structure on the grounds Leicester Cathedral, the king’s appointed burial site. Architects at the firm were inspired by the gravestones that were originally located around the cathedral’s gardens, and the artistic installation of steel plates with life-size cut silhouettes depicting the king allows views through, into and across the grounds, “a constant reminder that this piece is intended to be understood in the context of the buildings around it,” according to local reports. e sculpture, entitled “Towards Stillness”, is designed to reflect on King Richard III, and “reimagine the diﬀerent stages of his journey in a more direct way.” e plates graduate from polished stainless steel, to brushed steel, mill-finished steel before transitioning into two increasingly distressed steel plates and plates made of a corten steel with varying degrees of rust. e last plate rises to depict King Richard III’s discovery in the parking lot, pointing toward his eventual tomb inside the cathedral. Atheist request to remove steel cross from 52

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Light Gauge

LightGaugeStories

9/11 memorial denied in court In early August, a US federal appeals court rejected a challenge by the organization American Atheists to remove a 17-foot-tall cross made of steel beams found in the World Trade Center rubble from its current display at the National September 11 Memorial and Museum. In its lawsuit, American Atheists argued that the cross’s display denies atheists of equal representation and violates the Establishment Clause of the First Amendment by breaching the separation fo church and state. “Atheists died on 9/11, members of our organization suﬀered in lower Manhattan on that day, and our members helped with the rescue and recovery eﬀorts,” American Atheists president David Silverman said in a statement. e appeals court panel, comprised of three judges, rejected the claim on the basis that the cross is a “genuine historical artifact” rather than a religious symbol. American Atheists’ demand that the museum include an “atheist recognition plaque” was also rejected, as the First Amendment doesn’t require exhibitions to recognize all groups upon displaying a religious object any more than it intends to eradicate all religious-related objects from public life. New steel plate for shipbuilding promise increased collision protection In August, Japan’s National Maritime Research Institute (NMRI) reported that Imabari Shipbuilding’s Saijo Shipyard launched a 206,600 dwt bulk carrier for Mitsui O.S.K. Lines, with a hull made from 3,000 tons of NSafe Hull, a new, highly ductile shipbuilding steel plate for significantly improved collision protection. While maintaining machinability and weldability of conventional steels, the ductility of the new steel material ensures that the energy absorbed before a hull fracture in a side collision will be roughly three times that of a ship made of conventional steel. Japan’s Nippon Steel & Sumitomo Metal Corporation developed the NSafe Hull steel with collaborative R&D involving Imabari Volume 7; Issue 4

Cross made from Twin Tower beams

Shipbuilding and the NMRI, using microstructural control of its chemical composition at the crystalline level. In particular, the 3,000 tons used in the Mitsui bulker was used for structural aspects such as the side plates of cargo holds and fuel tanks, where high collision safety performance is required. e material is also designed to prevent oil leakage and water intake into cargo holds, giving the added value of environmental and cargo protection.

US Nitrogen donates $20K in steel and piping to Tennessee tech college US Nitrogen Construction donated over $20,000 worth of steel and piping to be used for Tennessee College of Applied Technology’s (TCAT) welding program and a new pipefitting class in August. e materials were left over from construction of the company’s new state-of-the-art facility in Greene County, Tennessee.

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Former steel tycoon set to leave Egyptian jail Ahmed Ezz, former chairman of Ezz Steel and a senior leader in the political party of Egypt’s former president Hosni Mubarak’s, was expected to leave jail in August after paying bail and fines in three corruption cases against him. e fines totaled 11 million Egyptian pounds (US$1.54 million) and bail charges, which he already paid, totaled 152 million (US$21.26 million). Ezz was arrested in 2011 after the uprising the ousted Mubarak from power.

LightGaugeStories

“At US Nitrogen, we have a very high standard for materials used in our construction site, and a strict inspection process,” said US Nitrogen Construction Manager Victor Smith in a press release. “e donated materials, while not suitable to be used in our facility, are perfect for students to practice skills.” e materials will benefit TCAT’s diverse student population, which includes traditional full-time trade students, employees of companies completing continuing education and part-time students in night classes, according to the release. “Metal to train with is a very expensive item, and without this generous donation, we would have had to take this large expense out of our operating budget,” said TCATMorristown Director Jerry Patton.

Former Bethlehem Steel plant in Lackawanna, New York

Energy in mid-August to discuss plans to install 13,000 solar panels on the site of the former Bethlehem Steel plant. BQ Energy plans to break ground on the farm by the end of September. “It shows that we’re heading in a new direction,” said Fred Heinle, Lackawanna Director of Development. “We’re taking our rust belt image and we’re creating a new, green, sustainable, resilient community here in Lackawanna for the residents as we move forward.” If completed, the project would be the largest solar energy project in New York. Yet another “new steel”? First wood, then carbon fiber, and now bamboo is entering the fray to be the “new steel” of the moment, particularly in the con-

Ezz Steel, still in operation after Ahmed Ezz’s arrest

New solar project could revitalize old Bethlehem Steel plant e director of development in Lackawanna, New York planned to meet with attorneys from Poughkeepsie-based BQ

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struction sector. Ho Chi Minh City, Vietnam-based firm Vo Trong Nghia Architects is a “bamboo architecture pioneer” after recently constructing projects that demonstrate the extensive capabilities of bamboo, which Volume 7; Issue 4

some have dubbed “vegetable steel.” e firm has most recently begun construction of eight 24-metre (78.7-foot) wide domes made from woven bamboo stalk columns that are secured into concrete foundations on Diamond Island. e domes are intended to be used as community spaces for local residents, for conferences, parties and for a restaurant. e firm advocates bamboo as easily replaceable, inexpensive, and yet strong, ideally used in conjunction with concrete. But while bamboo might feasibly help solve Vietnam’s housing crisis, the trend is unlikely to catch on in other areas of the world where steel and wood framing rule. However, the firm also points out that once bamboo is soaked in mud and smoked, it becomes as strong as traditional timber. The bride wore steel When Ben and Courtney Sikkenga married in August, she might have added a new category to the tried-and-true “something old, something new, something borrowed, something blue”: something steel. eir wedding was held at a western Michigan ice rink where they first met in seventh grade, and in addition to a traditional white dress, the bride and her groom, a lifelong hockey player, made their grand entrance into the rink-top ceremony on steel ice skates Guests sat on chairs on the ice or on benches behind the rink’s protective glass, and the newlyweds exited the rink after the ceremony through a canopy of raised hockey sticks. SO \

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TradeLawWatch

TradeLawWatch Trade laws and power politics

he recent series of antidumping (AD) and countervailing duty (CVD) investigations of oil country tubular goods (OCTG) from nine countries witnessed the most intense application of political pressure in recent memory. Following the preliminary determination by the US Department of Commerce (DOC) that imports of Korean OCTG were not dumped, the domestic pipe industry orchestrated an unprecedented fusillade of letters, meetings, and press releases by their Congressional allies directed at the DOC—from the analysts handling the case to the Secretary of Commerce herself. Subsequently, when the DOC released its final determination, it found dumping margins on all Korean OCTG producers ranging from 9.89 to 15.75 percent. While many attributed this change in results to the eﬀect of political pressure on a government agency, we submit that such a conclusion is overblown and will lead to a number of unfortunate consequences. First, we expect that this outcome will likely persuade domestic petitioners to call on Members of Congress to intercede in future trade proceedings if they are unhappy with decisions by the DOC. is will further inflame what should be an even-handed and objective administrative process, and it will divert the time and energy of DOC oﬃcials who are trying to apply the trade laws fairly and correctly. In addition, other interested parties—from foreign producers and their governments to US importers and customers—may think that the outcome of trade cases can be determined by political pressure rather than by the facts on the record. is could cause them to engage in similar attempts to exercise political influence. However, a more likely outcome is the erosion of their confidence in the integrity and fairness of the administration of the US trade laws. Such consequences would be harmful to all parties, including the domestic industries that file AD and CVD petitions. Moreover, we believe that the record of the Korean OCTG investigation shows that

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the DOC would have reached the same results without the unprecedented level of political activity that occurred in connection with that proceeding. Let us explain the background of the OCTG proceedings and the reasons for our conclusion. On the afternoon of February 18, 2014, the DOC began releasing its preliminary determinations in the dumping investigations of OCTG from all of the countries under investigation. e Korean case was closely watched because, in 2013, imports of OCTG from Korea were almost 900,000 tons—greater than the total quantity of OCTG imports from the other eight countries combined. e DOC preliminarily found that the two Korean companies selected for individual examination—Hyundai HYSCO and NEXTEEL Co., Ltd.—were not dumping OCTG in the United States. According to its normal procedures, the DOC made a negative preliminary dumping determination for Korea and instructed US Customs and Border Protection (CBP) not to take any action with respect to OCTG imports from Korea. Lost in the subsequent blizzard of angry press releases and Congressional activity was the fact that the DOC also found no dumping margins for individual mills in Taiwan and Turkey. However, because of Korea’s predominant share of imports, the negative dumping determination for Korea held center stage in the ensuing drama. e reaction to the DOC’s preliminary determinations began almost immediately. On February 21, Leo Gerard, President of the United Steel Workers, spoke directly with Secretary of Commerce Penny Pritzker and several of her staﬀ, complaining about the decision on Korea. Secretary Pritzker responded that the investigation was continuing and—in words that would be repeated often over the next several months—the DOC “would continue to conduct its investigation in an open and transparent manner.” Other telephone calls and meetings followed. Senior Commerce oﬃcials traveled to CapiVolume 7; Issue 4

tol Hill to brief the staffs of 19 Senators, reassuring the legislators that Commerce “would consider thoroughly all information and argument . . . in making its final determinations.” DOC officials also acknowledged “the importance of these investigations to domestic OCTG industry.” ere followed a whirlwind of Congressional meetings, telephone calls, and correspondence. Fifty-seven Senators, including Majority Leader Harry Reid and Trade Subcommittee Chair Debbie Stabenow, sent a letter to Secretary Pritzker that expressed concern that “certain information used for [the DOC’s] preliminary determination did not fully reflect the costs of production and sales for the Korean producers.” e Senators also claimed that “Korea has one of the world’s largest steel industries but no domestic OCTG market”—a fact that has no relevance to the DOC’s dumping calculations. Subsequently, several Senators met privately with Secretary Pritzker, and others spoke with her or other senior DOC officials by telephone. Based on memoranda of these meetings which the DOC has placed on the public record, the focus of these communications was the preliminary negative determination on Korea. Members of the House of Representatives also launched a sustained campaign seeking a reversal of the DOC’s preliminary determination on Korea. Over 150 Members submitted a joint letter expressing concern about the impact of Korean OCTG imports on the domestic industry, which is an issue for the US International Trade Commission in its injury investigation—not for the DOC in its dumping analysis. Trade associations, labor unions, and transportation companies voiced their support of the US OCTG producers and their unhappiness with the DOC’s preliminary determination on Korea. ey included manufacturers’ associations in Alabama, Illinois, India, Ohio, and Pennsylvania as well as maritime coalitions and companies that serve the Great Lakes. e United Steelwork-

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TradeLawWatch

ers, the International Union of Operating Engineers, and the Teamsters rallied their members and urged the DOC to overturn its initial ruling on Korea. At the same time that the DOC was fielding calls from domestic interests, senior DOC officials flew to Seoul and assured the Korean Deputy Ministers for Economic Affairs and Trade that “the Department of Commerce’s decisions are based on the facts on the record and that all proceedings are conducted in an open and transparent manner with full opportunity for interested parties to comment on the record.” When the DOC announced its final determinations in the OCTG investigations, the preliminary finding of no dumping by Korean producers was superseded by dumping margins ranging from 9.89 percent to 15.75 percent. Almost at once, commentators attributed this result to the intense and unrelenting lobbying campaign orchestrated by the domestic industry. However, careful review of the DOC’s decision memoranda shows that the dumping margins were, in fact, grounded on an impartial analysis of the facts on the record— just as Secretary Pritzker and her colleagues had promised. And, as the result of further investigation following its preliminary determination, which included the collection of additional information as well as on-site audits of the Korean producers, the final record contained facts that were not on the record during the preliminary phase. For example, the DOC adjusted certain expenses, such as international and domestic freight, to more accurately reflect arms-length prices, and it recalculated credit and warranty charges, packing expenses, and certain input costs. For the final determination, the DOC also combined pricing data from affiliated companies with the data from the company respondents, in accordance with its normal practice. Further, the DOC made adjustments to the Korean producers’ costs of production on the basis of information received after the preliminary determination and verified during the on-site audits. ese kinds of post-preliminary changes and adjustments are not uncommon in original investigations as the DOC collects additional information during the course of the proceeding. We submit that this additional information would have been collected and that the DOC’s final determination would have been the same even if more than 200 Members of Congress, various trade associations, and labor unions had not launched a massive lobbying campaign. It is in the interest of all parties to US trade proceedings, including domestic producers as well as foreign producers and US customers, that the DOC be seen to do what it promises to do—“conduct its investigation in an open and transparent manner” and insure that its “decisions are based on the facts on the record.” is is what the US Department of Commerce, in fact, did in its investigation of OCTG from SO \ Korea.

Frederick P. Waite Kimberly R. Young William M.R. Barrett

Vorys, Sater, Seymour and Pease LLP (Washington, DC)

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Volume 7; Issue 4

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By Dan Tetreault, Newcomb Spring Corp. Reprinted with permission from Wire Forming Technology Magazine

ewcomb Spring Corp., which is headquartered in Decatur, Georgia, is currently using an innovative measurement system to improve the speed and accuracy of its quality control processes for stampings, flat springs and wire forms. e system, called the Keyence Instant Measurement (IM) System, from Keyence Corp. of America, Itasca, IL, USA, can accurately measure part dimensions in seconds. is technology allows Newcomb Spring to quickly conduct quality inspections with consistent results, and without the variations caused by diﬀerent inspection equipment or diﬀerent operators. e Keyence IM System uses optical technologies to capture hundreds of part dimensions. Most of Newcomb Spring’s parts can be measured in approximately 30 seconds, versus traditional methods that could take

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upwards of 30 minutes. e Keyence IM System allows for a faster inspection process and one that identifies problems with parts and noncompliant dimensions. By quickly identifying issues, Newcomb Spring can stop and recalibrate its production equipment, greatly reducing the number of rejected parts. is capability helps the company to reduce waste and to keep its costs low. “Using the latest technology, Newcomb Spring is able to increase the speed and precision of its quality and compliance inspections, all while reducing the time and labor required to complete those inspections,” said Robert Ortiz, Project Manager at Keyence Corp. of America. “We’re very excited to see the company using our technology so effectively.” e Newcomb Spring facility network is comprised of eight manufacturing plants, seven of which incorporate a Keyence Image Measurement System, with the eighth plant awaiting its arrival in 2015. e technology has streamlined inter-plant operations, as each facility can compare consistent data. Keyence has made a remarkable difference in how Newcomb Spring conducts its quality checks. Specifications for a number of different parts can be saved into the system and recalled when needed. e operator simply calls up the order details, places the part on the Keyence System, hits a button and the measurement starts. is really speeds up Newcomb’s QC processes, and provides consistent results. e company can even confirm that parts made today match the dimensions of orders that were fulfilled months ago. Keyence IM System technology allows Newcomb Spring Corp. to be very efficient, helping the company to Volume 7; Issue 4

Fabricator’sCorner

Measurement System Improves Accuracy and Speed of Quality Control Processes

Fabricator’s Corner reduce waste and providing the highest levels of quality. To learn more, visit www.newcombspring.com or www.keyence.com. Schmitt Industries introduces new compact manual balancing systems Schmitt Industries, Inc., a leading US manufacturer of precision products for grinding wheel balancing, dressing, and automated process control under the SBS® brand, announced that it will be exhibiting several new products at the IMTS trade show, including the SB-2000, a fixed-installation system for single and dual plane manual balancing, and the SB-2000-P for portable applications. Both versions provide exceptional balancing accuracy, to within 0.02 microns displacement, and can work with a spindle speed range of 30 to 100,000 RPM. “e CNC interface on the dedicated control and the magnetic mounting on the SB-2000-P are unique features that make both products stand-outs among similar products.” says James A. Fitzhenry, President and CEO of Schmitt Industries. “In addition, the price of the two system versions provides customers with great value in addition to superior performance.” e SB-2000 is a compact manual balancing system that oﬀers both one- and twoplane manual balancing capabilities. It can be used with all of SBS’s existing keypad control-based mounting hardware and includes a dedicated CNC/PLC interface, so that the machine can be alerted when the vibration exceeds the user specified limits so that personnel may intervene to rebalance the machine. Where the two products diﬀer is in their packaging. e SB-2000 is designed as a unit to be permanently installed on the machine.

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Fabricator’sCorner With its digital design and intuitive icon-driven user interface, the SB-2000 is simple to set up and easy to use. Five balancing modes are supported (single position, two-weight, three-weight, fixed position and circumferential arc) with storage capacity for up to 30 balancing profiles for diﬀerent machines or setups. e unit also allows spectrum vibration plots to be generated and stored. e SB-2000-P is designed with portability in mind. e CNC/PLC interface is removed and a magnetic attachment system is provided, such that the user can easily attach it to any metal surface for balancing, then remove it and carry it to the next machine. e USB port allows the user to export balance data and settings and to update unit firmware. e SB-2000-P is available in a travel case that includes the vibration sensors and rpm sensor, along with other accessories that assist when using it in a mobile fashion. “Our customers are always looking for more economical, precise and easier to use balancing and process control capabilities,” said Fitzhenry, “At IMTS 2014 our customers will be able to see first-hand how our full range of products, including the SB2000, can improve part quality and throughput and increase profitability.” AISC’s sixth annual SteelDay set for September 19 Where will you be celebrating SteelDay? Whether you visit a structural steel facility, tour a project jobsite or attend a seminar, you

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can be part of the industry’s largest educational and networking event on September 19. Hosted by AISC and its members and partners, SteelDay oﬀers free events throughout the country for AEC professionals, faculty and students and the public to see firsthand how the vibrant U.S. structural steel industry works to build our country’s buildings and bridges. To find and register for events, visit www.SteelDay.org/FreeEvents. Now in its sixth year, SteelDay is a great opportunity to learn about the structural steel industry’s latest technologies (ranging from improvements in the properties of steel to better equipment and new communication and design tools), see what’s going on today with structural steel and network with people advancing the design and construction industry. At hundreds of locations across the country, steel fabricators, mills, service centers and others open their facilities for guests to learn about various facets of the industry. And year after year, SteelDay proves to be an invaluable experience for new and seasoned professionals alike. Elmo Diaz teaches high-school students industrial arts out of his blacksmith shop in Omaha, Nebraska, as part of a local partnership program. He and some of his students attended a nearby SteelDay event last year at Davis Erection (an AISC member and AISC advanced certified steel erector) and afterwards commented “My goal is to show my students that they can make a great living in the trades, and the opportunity for future employment that this SteelDay event demonstrated to them is priceless.” And in New Brighton, Pennsylvania, after a SteelDay tour at Littell Steel Company (an AISC member and Volume 7; Issue 4

AISC certified fabricator), Roy F. Kim, Jr., P.E., of House and Building Engineering said “SteelDay gives engineers a chance to see the products as a physical reality, and to learn new fabrication and construction methods.” Designers and developers also offer project site tours. In July, AISC hosted a special pre-SteelDay presentation and site tour of Chicago’s first Girder-Slab® project, known as Circa 922, an innovative steel multi-story residential project under construction downtown. Guests explored firsthand how the project’s structural steel framing and precast hollow core floor system have provided a proven structural system, large open bays, architectural flexibility, low cost and a quick construction schedule. Watch the video (courtesy of Descon Plus) to see highlights from the tour. Can’t get to an event on SteelDay? Don’t fret. Live webinars will be offered. In addition, participants can request a brief informative video about the structural steel industry (email info@steelday.org), and, where possible, an industry representative will visit your company’s office or vocational school on SteelDay to answer any questions. “Never before have there been as many ways to be involved with SteelDay,” said Ross Allbritton, AISC’s industry mobilization manager. In addition to connecting attendees with structural steel experts in their local area, SteelDay features special events in major cities. For instance, AISC will be hosting a Chicago bus tour, where attendees can marvel at landmark steel structures throughout SO \ the city.

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BrainTeasers

Crossword Across

2. A VP at this company told reported in January 2014 that the steel industry “failed” to develop AHSS fast enough 7. President of INDA, the Brazilian steel distributors institute (last name) 9. In July, AK Steel idled its blast furnace in this city for the second time this year 11. MMX, Mubadala and Trafigura are building a port in this Brazilian city 14. Manufacturer of the Instant Measurement System used by Newcomb Spring Corp. 16. Acronym for the auto regulations enacted by US Congress in 1975 as a reaction to the global oil crisis 18. Antonio Gozzi is president of this Italian steel association 19. e latest material claiming to be “the new steel” 22. e steel dome of this US city’s new central library won the AISC’s 2014 IDEAS2 award 25. e port in this US city announced record steel shipments in July 27. is country has been added to the newly-designated BRICS nations 29. is European country is ranked 15th among exporting countries worldwide 30. Governor of the Reserve Bank of India (last name) 32. Chinese steel traders have lately faced a shortfall of this 34. is car manufacturer turned “safety into a sales pitch” 35. is country registered the highest production growth rates of crude steel in Latin America during the first five months of 2014 36. CEO of Companhia Siderurgica Nacional (last name) 37. City where the 25th Brazilian Steel Congress was held August 12-13, 2014

Down

2. Annual event held by AISC to introduce the public to the US structural steel industry 3. is Chevy model won Motor Trend’s Car of the Year award for its use of AHSS 4. Head of the US Federal Reserve (last name) 5. US Steel idled plants in Pennsylvania and this US state in August 6. Mexican state where AHMSA’s Fénix Project is located 8. e Canadian Museum of Human Rights is located in this Canadian city 10. e US DOC made a preliminary ruling that OCTG imports from this Korean mill were not considered dumping 12. Essar Steel denied rumors it was looking to sell its plant in this US state 13. A bleak period in this nation’s recent economic history was called the “Lost Decade” 15. Use of AHSS reduces this polluting byproduct of manufacturing steel 16. A $270 million commodities theft scandal in China involves this financial firm 17. is US automaker recently replaced certain steel parts with aluminum in its best-selling vehicle 19. e World Cup slowed down this country’s steel production for the duration 20. New Zealanders refer to this as “white gold” 21. is subsidiary company of Gerdau plans to invest $184 million in a new Argentinian mill 23. is Taranto, Italy-based steel producer has faced several problems in the last few years 24. e long-lost remains of this British monarch were found under a parking lot in 2012 26. is Brazilian steelmaker plans to expand its iron ore capacity from 8 to 12 million mt 28. President of the American Institute of Steel Construction (last name) 31. A disputed memorial cross in front of the 9/11 museum in New York is made from this recovered steel product 33. Hyundai Steel and this Korean steelmaker have ramped up eﬀorts to develop AHSS

1. Steel magnate Ahmed Ezz was arrested shortly after the ouster of this former Egyptian president (last name)

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Volume 7; Issue 4

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Across 2. SEVERSTAL 7. LOUREIRO 9. ASHLAND 11. ITAGUAI 14. KEYENCE 16. CAFE 18. FEDERACCIAI 19. BAMBOO

22. SANDIEGO 25. HOUSTON 27. SOUTHAFRICA 29. SPAIN 30. RAJAN 32. LIQUIDITY 34. VOLVO 35. ARGENTINA 36. STEINBRUCH

37. SAOPAULO

Volume 7; Issue 4

BrainTeasers

Down: 1. MURBARAK 2. STEELDAY 3. VOLT 4. YELLEN 5. TEXAS 6. COAHUILA 8. WINNEPEG 10. NEXSTEEL

12. MINNESOTA 13. JAPAN 15. EMISSIONS 16. CITIGROUP 17. FORD 19. BRAZIL 20. MILK 21. SIPAR 23. ILVA 24. RICHARD

www.steelorbis.com 26. USIMINAS 28. FERCH 31. BEAMS 33. POSCO

Crossword Answers:

Steel ‘Toon

week 28 week 29 week 30 week 31 week 32 week 33 week 34 week 35

Rebar

12-25 mm 8-12 mm CIS Turkey Export FOB Black Export FOB Sea (USD/mt) (USD/mt)

week 28 week 29 week 30 week 31 week 32 week 33 week 34 week 35

Min. Max. 560 570 560 570 560 570 560 570 570 575 570 575 575 585 575 585

Average 525 530 530 530 540 550 550 550

Hot Rolled Coils

(2 mm) Russia Export FOB (USD/mt)

(2 mm) Ukraine Export FOB (USD/mt)

week 28 week 29 week 30 week 31 week 32 week 33 week 34 week 35

Min. 535 545 545 545 545 545 545 545

Min. 510 515 515 515 515 515 515 515

Max. 565 580 580 580 580 570 570 570

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Max. 520 525 525 525 525 525 525 525

A3 CIS Export FOB Black Sea (USD/mt) Min. Max. 334 336 341 346 341 346 341 346 349 351 351 353 351 356 351 356

Base Sizes USA Domestic mill price (USD/mt) Min. 755 755 755 766 766 766 777 777

(3-12 mm) China Export FOB (USD/mt) Average 510 510 510 510 510 510 510 510

Max. 777 777 777 788 788 788 799 799

USA domestic mill prices (USD/mt) Min. 711 711 728 728 728 728 728 728

Max. 733 733 750 750 750 750 750 750

Billets week 28 week 29 week 30 week 31 week 32 week 33 week 34 week 35

ST 37 CIS Export FOB Black Sea (USD/mt) Min. Max. 490 495 490 500 490 500 490 500 500 510 510 525 510 525 510 525

Wire Rod week 28 week 29 week 30 week 31 week 32 week 33 week 34 week 35

ST 37 Turkey Export FOB (USD/mt) Min. 510 515 515 515 530 530 535 535

Chinese USA import USA Low carbon Turkish Export DDP Domestic FOB Loaded mill price (USD/mt) Truck USG (USD/mt) (USD/mt) Min. Max. Min. Max. Min. Max. 705 725 717 739 600 610 705 725 717 739 600 610 705 725 717 739 585 595 705 725 717 739 585 595 705 725 717 739 600 610 705 725 717 739 590 610 705 725 717 739 590 610 705 725 717 739 595 610

Cold Rolled Coils

(0.5 mm) Russia Export FOB (USD/mt)

(0.50 mm) Ukraine Export FOB (USD/mt)

week 28 week 29 week 30 week 31 week 32 week 33 week 34 week 35

Min. 600 600 600 600 600 600 600 600

Min. 580 585 585 585 585 585 585 585

Volume 7; Issue 4

Max. 520 525 525 525 540 540 545 545

Q235 China Local (RMB) including 17% VAT Average 2660 2660 2660 2660 2660 2630 26020 2570

PriceReports

Scrap

HMS I/II 80:20 HMS I/II 60:40 USA Europe Export FOB East Export FOB Coast (USD/mt) (USD/mt) Min. Max. Min. Max. 335 340 316 321 337 340 318 322 337 340 318 322 337 340 318 322 337 340 318 322 347 350 328 332 352 355 335 337 352 355 335 337

Max. 650 650 650 650 650 650 650 650

Max. 590 595 595 595 595 595 595 595

(1.0 mm) China Export FOB (USD/mt)

USA domestic mill prices (USD/mt)

Average 580 580 580 580 580 580 580 580

Prime

Min. 843 843 838 838 838 838 838 838

Max. 865 865 860 860 860 860 860 860

Editor’s Corner

A bad rap

uring a summer scorched with scandal and tragedy and warfare around the world and within US borders, nary a word was shouted amongst pundits or spread across the Internet about one once-fashionable topic: the economy. No laments about skewed unemployment numbers, no vigorous defenses of the autonomy of alleged job creators, no calls for financial sector reform or campaign contribution reform or any button-pushing reform or regulation. Even Obamacare, a favorite news punching bag and economic boogeyman, took a vacation from the spotlight. Has the US economy been too boring? Or has it just been nowhere near as deliciously newsworthy as flag-waving protesters shouting down busloads of refugee children or criminal hackers robbing celebrity photo clouds? Turns out, the economy hasn’t been doing too bad. After a dismal 2.1 percent drop in the US’ GDP during the first quarter, the economy came roaring back in Q2 with 4.2 percent growth. And while some analysts think the third-quarter GDP growth will settle down to a 2.5 percent increase, other sources, such as the Institute of Supply Management, think the rocket-ride will continue with a 4.9 percent increase. Aside from GDP, consumer confidence grew for the first half of 2014 before dipping a scant 0.1 percent in July, and construction spending and housing starts have shown decent gains in the last few months. Within the context of the last few years, such gains make sense—the US economy is still in an undeniable recovery, and despite a few hiccups that only seem like setbacks when certain news media blow them up to be such, we’ll keep on chugging and prospering and hopefully learning from our mistakes so we don’t make them again. Why? Because deep down, the fundamentals of Americanstyle capitalism are sound, only failing when they’re grossly abused by the powerful and greedy. Removed from the humans who operate it, it’s no secret why our economic system is a beacon to our neighbors around the world. e misfortunate and fortunate alike are

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drawn to the solid foundation of opportunity and flock to our shores and borders to explore the potential within them. Just because so many of them are treated so poorly upon arrival doesn’t diminish America’s promise, although it does tarnish our image (the Statue of Liberty wasn’t supposed to be a bouncer, people). What’s more, the US economic system hasn’t even tapped into its own full potential yet. ink about it—with this country’s collective wealth of money and brains and talent, we could do so much better. We could be 100 percent energy independent. We

could become the global center of quality manufacturing, boosting exports and guaranteeing annual trade surpluses. We could divert all the funds we waste on foolish military ventures into education and the arts, reinforcing our apex position in worldwide cultural popularity while enticing the world’s best and brightest to immigrate. So why haven’t we unlocked these achievements already? e easy answer is too many jerks in power, but the more complicated answer goes back to America’s infancy as a European immigrant settlement, long before the descendants of those first settlers banded together to make an oﬃcial nation. People came to the New World for one of two primary reasons (although often both): to make money, or live independently. ousands of years of human ambition and love of shiny things explained the former. e latter was the result of centuries of the fortunate few oppressing the misfortunate many. At Volume 7; Issue 4

some point, several of the many said “screw this” and sailed across the ocean for the opportunity to live however they wanted, worship however they wanted, burn whoever they wanted at the stake. It was the birth of the Rugged American Individualist, and while that image looks pretty good on a paper towel wrapper, the reality of such objective determinism—combined with the visions of gold and cotton and tobacco dancing in their fellow settlers’ heads—turned real gruesome real quick. e price of freedom and riches was paid with the near-decimation of an entire continent’s population. Modern US citizens try their best to forget, but they owe it to the victims of their ancestors to make something great out of their ill-gotten gains. Seriously, if you’re going to steal a yacht you might as well throw a party, not park it in a swamp and let it rust. e basic desires of our two American archetypes—the individualist and the entrepreneur—are the basic desires of us all: Live Free and Live Well (I would add “be nice” but that might be asking too much). If we can recognize that in each other, if we can quit sniping about our diﬀerences and blaming each other for the past and trying to hurt and control each other, perhaps we can finally start to build the future we deserve. And once we have it (with robots doing our bidding an no one wanting to bomb us and welcoming with open arms anyone who shows up to contribute), America will finally graduate from an experiment in human civilization to the next step in its evolution. SO \

Katie Memmel