The philosophy underpinning the Steel Manufacturers Association’s conference schedule is similar to the ideology of its mini-mill electric furnace industry membership. The association holds only two events a year, taking pride in embracing a lean operating policy.
Although the meetings may be few, they pack a punch. This year’s annual spring event in Washington attracted more than 250 participants, including the top names in the steel industry and not just one but dozens of congressmen.
In addition to a congressional reception hosted at the Capitol for delegates, elected officials were on hand the next day at a breakfast held at the Rayburn House Office Building.
During the course of the event, it was made clear that previous discussions regarding the formation of a new trade group with the American Iron and Steel Institute have gone silent and that the SMA fully intends to stand on it own. The two organizations remain amicable, but a link-up is no longer an active option.
With news breaking during the opening reception of the meeting that John Correnti had secured financing from China for his Steel Development Co. LLC greenfield project in Mississippi, there was plenty of buzz—little of it positive.
On the sidelines, many executives said it was absolutely wrong that a Chinese state-owned entity could set up shop in the United States while Beijing was not willing to reciprocate and allow U.S. companies to own factories there. Ironically, even those who service or supply the domestic industry—and may gain a potential new customer—were opposed to the idea.
The “by invitation only” part of the event was accepted by key decision makers at ArcelorMittal, Cascade Steel Rolling Mills Inc., Charter Manufacturing Co. Inc., Commercial Metals Co., Deacero SA de CV, Gerdau Ameristeel Corp., Jersey Shore Steel Co., Keystone Consolidated Industries Inc., Latrobe Specialty Steel Co., LeTourneau Technologies Inc., North Star BlueScope Steel LLC, Nucor Corp., Quality Bar, Republic Engineered Products Inc., Scaw Metals Group, Severstal North America, SSAB North American division, Steel Dynamics Inc., Sterling Steel Co. and V&M Star. They were joined by 40-plus suppliers, including GrafTech International Ltd., Nalco Co. and Tube City IMS, along with officials from the Commerce Department, the U.S. Trade Representative (USTR) office, the Environmental Protection Agency and the International Trade Commission.
Subjects covered in an afternoon session ranged from China and the environment to infrastructure and a sobering take on the economy.
“In a word, the outlook is horrendous, the budget deficit is horrendous and even more frightening is the global position for the United States,” C. Fred Bergsten, director of the Peterson Institute for International Economics, a leading Washington “think tank” told delegates
Bergsten pointed out that debt now accounts for 4 to 5 percent of U.S. gross domestic product (GDP). “If you look out to 2030, the debt will rise from the current level to 15 percent of GDP,” he said. Two possible scenarios may result: an economic downturn that could sink the value of the U.S. dollar, causing interest rates to skyrocket; or foreign countries will continue to finance large U.S. debts, resulting in more unnecessary spending and borrowing.
The inflow of offshore financing falsely keeps the country liquid and its interest rate down, Bergsten said. “We want to bring our international house into order,” he added. “We should set a goal of limiting our foreign deficit to no more than 3 percent of GDP, which would avoid a build-up in the foreign ratio of debt to our economy. It is by far the most single important issue.”
The undervaluation of the Chinese yuan is another problem, Bergsten noted, especially given the Asian nation’s rapidly expanding economy. “They would do well without any currency manipulation. Even if the U.S. had done everything right, the policies of China would have badly cut our efforts. Chinese behavior is blatantly protectionist because it stimulates exports and deters imports,” he said.
John Lichtenstein, metals industry group managing director of Accenture, also sounded a warning on China’s growing impact on the world steel industry. “China is on the verge .?.?. of consuming a large part of global manufacturing. They will choke off demand in a number of countries,” he said.
Lichtenstein believes that China’s stimulus program was a success because it was highly infrastructure-focused and consumed an additional 50 million tonnes (55.1 million tons) of steel in 2009, compared with 5 million to 10 million tons in the United States.
The world economic crisis varied in its impact regionally and the recovery is following a similar pattern. Lichtenstein suggested that the return to previous steelmaking levels in the United States will not be an even ride. “The recovery is slow, uneven and erratic, with cold spots and hot spots,” he said. “The economy remains vulnerable to shocks.”
Lichtenstein expects steel consumption in the U.S. and Europe to return to 2008 levels in 2015. During the heart of the recession, the U.S. was quick to adjust costs but not as resilient in fending off pricing resistance, he said. The decision by steel buyers to scale back their purchases is a positive and will force buyers to continue to return to the trough as supply chain inventories will stay leaner for the foreseeable future.
The outlook for flat-rolled demand will be negatively impacted by fewer vehicles being produced and the continued downturn in the construction sector, Lichtenstein said.
Other keynote speakers included Timothy Reif, general counsel for the USTR; Steve Fruh, acting associate division director of the EPA’s Office of Air Quality, Planning and Standards; and Daniel Elliott, chairman of the U.S. Surface Transportation Board, who discussed infrastructure.
Aside from power networking with congressmen and attending lectures, SMA chairman Rob Simon, executive vice president of Evraz Inc. North America, set time aside to recognize the safety achievements of the industry. General managers and key employees from across the country were invited to the event and honored for their successful year.
The 2010 Don Daily SMA Achievement in Safety Award—established in honor of the former president of Gallatin Steel Co., Ghent, Ky., who passed away in May of last year after a short illness—was given to John Carroll, vice president of human resources, safety and security at SSAB North American. “Carroll was recognized as an excellent leader and active role model for the steel industry through his commitment to improvement in safety programs and dedication to a strong safety culture,” SMA president Thomas A. Danjczek said. “He has strengthened numerous SMA safety activities through his exemplary leadership, particularly the fatality prevention initiative.
Overall safety recognitions were presented to ArcelorMittal Harriman, C/G Electrodes LLC, Latrobe Specialty Steel, North Star BlueScope and SSAB operations in Mobile, Ala., and Montpelier, Iowa.
A total of 11 operations were recognized for recording zero time lost to an accident last year. Awards were presented to several Gerdau Ameristeel facilities, Nucor facilities in Texas, Marion, Ohio, and Kingman, Ariz., LeTourneau Technologies Inc., Republic Engineered Products in Gary, Ind., Severstal Columbus and a Steel Dynamics Inc. facility in Pittsboro, Ind.