U.S. Steel, Nucor CEOs urge caution on natural gas exports
By John D. Oravecz
Published: Friday, March 22, 2013, 12:01 a.m.
The nation's two top steelmakers told a congressional hearing on the health of the industry that exporting natural gas is one of their top concerns.
U.S. Steel Corp. and others in the industry say natural gas cuts costs and addresses environmental concerns over the use of coal to produce steel.
“There is a renaissance under way in the manufacturing sector,” said U.S. Steel CEO John Surma. “It is propelled by the availability and competitive pricing of natural gas.”
Surma and John Ferriola, CEO of Nucor Corp., said exporting some of America's booming natural gas supply should be approved only after domestic needs are met.
“A cautious approach would be appropriate,” Surma said. “I would not like to have to worry about where (natural gas) will come from.”
A federally backed study released in December concluded that the more natural gas America exports, the greater the economic benefits for the country. The study could be key in whether the government issues export permits to gas companies.
That conclusion raised concerns among manufacturers and consumers who could pay higher prices for gas as a result.
John Tumazos, a steel analyst with Very Independent Research in Holmdel, N.J., said the U.S. Steel and Nucor comments were self-serving.
“If you own ground in Beaver or Westmoreland counties with shale gas, and got royalties, you'd want the producer to sell for the highest price. ... A natural gas producer in a free-market economy should be able to sell to whomever he wants.”
“In the long run I don't think exports will be a big deal,” Tumazos said. The process of cooling natural gas to a liquid is complicated, demanding and expensive. “I'll be surprised if 10 (percent) to 20 percent is exported.”
The energy sector is a bright spot in the slow-growth economy for U.S. Steel, one of the largest gas consumers, Surma said.
The company invested $100 million on a new pipe plant in Lorain, Ohio, and reopened the McKeesport Tubular plant to take advantage of demand for drilling pipe. Last year, it used more than 130 trillion cubic feet of gas in North America.
It increased natural gas use in its blast furnaces to reduce coke, made from coal, in the iron-making process. “Every ton of coal we can replace with natural gas helps us reduce total emissions,” Surma said.
Rep. Tim Murphy, R-Upper St. Clair, chairman of the Congressional Steel Caucus, a group of 100 lawmakers from 30 states, said steelmakers face challenges from nations that violate trade agreements. “Chinese steelmakers are dumping excess product into our markets in clear violation of international trade agreements,” he said.
Imports from China have grown 34 percent in the past year, he said, citing Department of Commerce figures.
Richard J. Harshman, CEO of specialty steel and titanium producer Allegheny Technologies Inc., which employs 4,000 in Western Pennsylvania, said there is substantial evidence of unfair trade practices such as dumping and foreign government subsidies.
“U.S. policy ... needs to be clarified and updated so that U.S. producers are competing on a level playing field.”
Steel analyst Tumazos said it's unfortunate that Chinese companies are subsidized, but American manufacturers that make products from steel are “at a disadvantage if they don't get cheaper steel.”
He said steelmakers should cut prices to discourage imports and sell more products here and overseas.
In the era when hot-rolled coil sold for $300 to $400 a ton, companies watched costs more closely. With prices now at $620 or higher, they aren't as diligent, he said.
John D. Oravecz is a staff writer for Trib Total Media; 412-320-7882 or firstname.lastname@example.org.
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