Rick Blume, GM Commercial for Nucor’s steelmaking group, strode on stage to the muscular sounds of steel pedal as a video played in the background, showing how Nucor is at the forefront of the steel industry in many ways.
But all the awesome bluster aside (thanks for your sponsorship, Nucor!), Rick got down to brass tacks and uncovered a rather tough (if not outright grim) picture for producers these days. He began exemplifying how a producer must approach these uncertain times by diversifying their product lines, production processes, DRI plant investments and energy (natural gas) sourcing.
It’s not easy for workers or companies.
Not only were there dramatic falloffs in GDP and other economic metrics post-2008, there have been more job losses following the most recent recession than in any recession between 1974-2001. In terms of unemployment rates, underemployment is not good enough, and there is a sizable portion of folks who have given up looking for a job. If you include all these categories, Rick said, the rate is closer to 15 percent. Ultimately, over 25 million jobs are needed to get back to where we were.
There are several challenges for producers that Rick outlined, among them and regulations and permitting climate and raw materials prices. As far as commodity pricing goes, the increases since 2001 or 2002 have been dramatic for scrap #1 Busheling Chicago (372%), metallurgical coal (282%), iron ore fines (625%), and zinc (roughly 60%), among others.
However, the H.E.A.T sector (Heavy Equipment, Agriculture, and Transportation) will continue growing in the coming years, and demand for the steel and other finished products that are necessary to drive the sector will continue to be relatively strong. On a base level, population growth will push steel consumption and emerging market demand won’t be going away anytime soon.
Although we’re seeing an improving picture here, buyers will still remain cautious, Rick said. Inventory will also be strictly managed. To “navigate turbulent times” in the future, companies must take care of their customers and maintain a strong balance sheet, he said.