steel – a few items impacting u.s. minimills
DESCRIPTION
HBIA 2007 Spring Meeting. Steel – A Few Items Impacting U.S. Minimills. Thomas A. Danjczek, President Steel Manufacturers Association February 23, 2007. In February 2007, The Times they are a’changing…. HBIA 2007 Spring Meeting. Trade Imbalance. Steel Demand Fluctuating. Consolidations. - PowerPoint PPT PresentationTRANSCRIPT
Steel – A Few Items Impacting U.S. Minimills
Thomas A. Danjczek, PresidentSteel Manufacturers AssociationFebruary 23, 2007
HBIA 2007 Spring Meeting
In February 2007, The Times they are a’changing…
HBIA 2007 Spring Meeting
Steel DemandFluctuating
EnergyCosts
World Steel Growth
FreightCosts
China’sSubsidies
U.S. GovernmentDebt
Perennial Problems
Consolidations
Ore/CoalCosts
DemocraticCongress
59% EAF in U.S.
Labor Contracts
China’s SteelGrowth
Trade Imbalance
Operating Costs Benefits& Energy
Service CenterInventories Up
HBIA 2007 Spring Meeting
A Few Facts
-Steel prices through August 2006 were at historic high levels
-Steel producer mergers continue – top 3 U.S. companies (Mittal, U.S. Steel, Nucor) now approximately 60%
-ITC cases not favoring U.S. producers (Wire Rod, Corrosion Resistant, Pipe 421, etc.)
-WTO cases also unfavorable (“Zeroing” & “Bratsk”)
-Current U.S. Government Prohibitive Subsidies Case
-Cost pressures continue (ore up 70% in 2005, 20% in 2006; natural gas in 2005 double 2004, etc.)
HBIA 2007 Spring Meeting
Steel Production
HBIA 2007 Spring Meeting
Price Forecasts
Source: AMM Research
Forecast Prices
HBIA 2007 Spring Meeting
Imports & Inventory
Scrap Demand
Source: DJJ, 2/07
HBIA 2007 Spring Meeting
China Facts
-China trade surplus swelled to $177 billion in 2006 – up 74% over 2005
-China trade surplus in 2001 (WTO joining year) was $22 billion
-China currency has only changed by 5.9% since July 2005
HBIA 2007 Spring Meeting
China Facts, cont.
HBIA 2007 Spring Meeting
China Facts, cont.
U.S. Trade Balance with China
-250
-225
-200
-175
-150
-125
-100
-75
-50
-25
0
Bil
lion
s of
$
Source: U.S. Census Bureau 2006 Estimate based on data from January to November
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (est.)
China Facts, cont.HBIA 2007 Spring Meeting
$7.5 billion in debt-to-equityswaps in 2000
An additional $6 billion in
announced subsidiesduring 2000
2005 steel policycommits China
to further subsidies,micromanagement
Support from localand provincialgovernmentsuncontrolled
by central government
State-owned enterprisesaccount for
57 percent of total Chinese production
Chinese steelmakersregularly obtain
preferential loansfrom state-owned
banks
Manipulation of keyraw materials
markets, includingcoke and ferroalloys
China Has the Most Heavily Subsidized Steel Industry in the World
Chinese steel producersenjoy government
assistance with energyand other input costs
Inadequate protectionof workers’ rights and
enforcement of environmental
standards
China Facts, cont.HBIA 2007 Spring Meeting
Within the Last Year, U.S Producers Have Been Hit with a Flood of Chinese Imports
0
1000
2000
3000
4000
5000
6000
2005 2006
tho
usa
nd
s o
f N
T
0
100
200
300
400
500
600
700
800
900
Corrosion-Resis tant OCTG Cold-Rolled
tho
usa
nd
s o
f N
T
2005 2006
Total U.S. Imports from China U.S. Imports of Critical High-Value Products
Source: AISI and IM-145 data
China Facts, cont.HBIA 2007 Spring Meeting
Aggressive Policy Measures Are Necessary to Prevent China from Causing a Major Crisis
• Enact real China legislation (apply CVD law to China, address currency manipulation, WTO reform)
• Strict enforcement of U.S. AD/CVD laws (appearance at HR hearing, letters, Congressional hearings)
• Make clear that Congress will not accept any new agreements (Doha, Korea FTA, etc.) with trade law weakening. Current system is broken.
HBIA 2007 Spring Meeting
HBIA 2007 Spring Meeting
Conclusion
-Need aggressive policy measures to prevent China from causing a major crisis
-It’s still a cyclical business (percent utilization, scrap, inventories, etc.)
-Still no Global Subsidies Agreement – massive subsidized growth continues
-No trade help from U.S. Government (421, antidumping, countervailing duties, etc.)
-When will inventories return to normal levels?
-Consolidation will continue
-China! China! China! (everything else is only an embellishment)
-Unknowns (interest rates, housing starts, economic growth, imports, customer base, pricing???)