Comments made by Dan DiMicco CEO and Chairman of mini mill steel maker Nucor last week to Wall Street analysts and reported in a Reuters article, underline the state of steel making in North America. “We do not believe that real demand has really improved much since the end of last year. And we don’t see things improving in the economy from a flat-roll standpoint or long products standpoint, whether we’re talking automotive, construction, housing, non-residential construction, oil company goods, or what have you,” said DiMicco.
Backlogs, ie orders in hand but not yet delivered, were not sufficient to predict how the fourth quarter operating rates would turn out which we may interpret to mean the steelmaker hasn’t much of a forward order book. Turning to prices, DiMicco said they did move up from month to month throughout the third quarter, but since then, there has been a definite softening on flat-rolled pricing. They admitted they have reached a peak for the time being in flat rolled pricing at the end of the third quarter.
Nucor posted their third successive quarterly loss in the third quarter, and this from arguably North America’s most successful steel producer and best placed to accommodate low capacity utilization rates because of their more flexible mini mill business model. It is highly unlikely any steel producers will be posting profits until well into next year.
Meanwhile in Europe the story is much the same, European steel industry body Eurofer came out with statements almost identical to Nucor’s blaming poor demand for continued operating losses and lack of forward orders. Finland’s two major steel producers Outokumpu and Rautarruukki both posted losses of US$97m and US$82m respectively. As in the US, the car stimulus packages have created a temporary rise in demand from automotive but as soon as the schemes come to an end so does the demand. With construction even more depressed in parts of Europe than the US, the situation does not look promising for steel makers in the first quarter of 2010.
Consumers on both sides of the pond can probably continue to buy only to meet demand for the rest of this year as prices ease and consider hedging a portion of their 2010 spend if the economic climate looks more positive at the turn of the year. Needless to say we too will be keeping close attention to the steel market and offering our predictions in December as to how we see the market in 2010.