Despite a rather bullish view of the steel market for 2010 and beyond, at least according to figures from the World Steel Association we ran earlier this week, Tony Taccone’s comments at the Purchasing.com Smart Sourcing Summit, took a more bearish tone. He believes US consumption will not increase to 2008 levels until 2014.
In addition to his predictions for the steel market, Taccone (First River Consulting) made two additional points worth noting. The first point he made suggests that some of the US mills have begun implementing export strategies. (the US currently has much more capacity than it does domestic demand). This should come as no surprise to MetalMiner readers. Emerging markets have long been the strategy for many US manufacturing entities. But the projected lack of demand in the US makes exports all the more attractive. When MetalMiner posed a question regarding the rationale behind the relentless focus of the steel companies on anti-dumping cases and other trade remedies, Taccone suggested that the industry would be better served trying to make inroads with regard to China FDI (foreign direct investment) laws and regulations so that US firms could take ownership stakes in Chinese steel mills. And when one considers that point in context of China’s and CISA’s (China Iron and Steel Association) desire to consolidate the Chinese steel industry, all the more reason for foreign companies to get more involved in China. The Wall Street Journal covered that angle yesterday.
The second point of interest centered on the classic notions of industry concentration. Only back in 2000, 42% of steel produced in the US came from 5 companies US Steel, Nucor, Bethlehem Steel, LTV and National Steel. By 2008, 68% of steel came from Nucor, ArcelorMittal, US Steel, AK Steel and Gerdau. For finished products, three producers have a 70% market share. This market concentration, the idling of unused capacity and the privatization of the steel industry has led to higher HR coil prices, which Taccone predicts will fluctuate within the $450-$850 ton range going forward as opposed to the $275-350 range it traded in from prior to 2003.
As the speaker for non-ferrous metals, we’ll withhold our commentary. Purchasing did a nice job summarizing our outlook.