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Global steel glut to force consolidation, execs say

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By John D. Oravecz
Thursday, May 9, 2013, 12:01 a.m.
 

The steel industry is suffering from worldwide overcapacity that will result in consolidation, executives said on Wednesday.

About 30 steel companies have disappeared in the past decade through mergers and acquisitions, but the industry's ability to produce steel hasn't changed accordingly, they said.

“I believe consolidation will be required going forward,” U.S. Steel Corp. Chief Operating Officer Mario Longhi told hundreds of industry representatives at a forum in the David L. Lawrence Convention Center, Downtown.

“Everything could be up for grabs,” Longi said during a break at AISTech 2013, a four-day technology conference sponsored by the Association of Iron & Steel Technology in Marshall Township.

That includes U.S. Steel, which must look at “everything that could enhance shareholder value,” including a merger, Longhi said. Over the years, speculation has had the nation's largest steelmaker being acquired by Luxembourg-based ArcelorMittal, the world's largest producer. And it has been suggested that U.S. Steel might be interested in acquiring West Chester, Ohio-based AK Steel Holding Corp., the nation's fourth-largest producer. “They always throw out trial balloons,” Longhi said, dismissing such reports.

An Ernst & Young study this year estimated excess steelmaking capacity worldwide at 479 million tons, greater than a year ago, because of continued growth in new steelmaking plants, especially in developing nations. Domestic and global shipments by U.S. steelmakers totaled 95.9 million tons in 2012.

Andrew S. Harshaw, chief operating officer of ArcelorMittal USA, said 42 percent of his company's plants are in Europe, where demand for steel is down 30 percent because of recessions in most Eurozone countries. In response, ArcelorMittal has been exporting from Europe to Brazil and other counties, he said.

Evraz North America, a large supplier of pipe for the oil and gas industry, has decided to focus on plants in Russia, Ukraine and North America, and it is “evaluating non-strategic assets” elsewhere, said CEO Michael T. Rehwinkel. Evraz is a subsidiary of Evraz Group SA in Moscow.

Anand Sen, a vice president of Tata Steel Ltd. of India, said he expects more mergers but cautioned that about 100 million tons in excess capacity is at plants that have never produced steel at consistent levels. About 100 million tons of capacity is antiquated and should be closed, he said.

A symptom of overcapacity is imported steel, which has risen 38 percent since 2010, said the executives, who blamed lack of leadership in Washington on enforcing trade rules on unfairly priced steel.

“There has been little or no action in Washington on the import of pipe in this country,” said Rehwinkel, who next week will become chairman of the American Iron & Steel Institute, the industry's main lobbying group.

For example, imports of pipe from Vietnam increased from 145 tons in 2010 to 220,000 tons in 2012, Longhi said, citing government figures.

“We remain the most attractive market in the world ... the most open ... and the most fair,” Longhi said. “Until that changes, we'll continue to be taken advantage of.”

A Commerce Department spokesman said the agency is committed to robust enforcement of antidumping and countervailing duty laws, to ensure that American companies and workers are given every opportunity to compete on a level playing field and to develop the competitive strength to expand into new markets. When a U.S. industry files a petition for initiation of an antidumping or countervailing duty case, Commerce investigates the matter.

Steel analyst Michelle Applebaum said that steel exports from China hit a post-recesssion high in April, up 27.7 percent so far this year compared to last, and up 6 percent from March. China's exports increased to 4.24 million tons — the highest level since September 2008. “We suspect that production will remain high as will exports in the coming months,” she said.

John D. Oravecz is a staff writer for Trib Total Media.

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