Looking at the future of the steel industry, the Steel Committee of the Organization of Economic Cooperation and Development (OECD) has stated that steel will remain one of the most important materials for modern societies, adding, however, that the steel industry faces huge challenges like overcapacity and volatility of the raw material and energy markets. According to Laplace Conseil, a consulting firm specialized in the metal and mineral industries, it is important to distinguish between the future of steel, which is bright, and the future of the integrated sector, which is more cloudy in Europe and North America.
The OECD Steel Committee said that the strategy of the large integrated companies will need to change so as to take into account the impact of cheaper scrap and direct reduced iron (DRI), especially in the US. Meanwhile, Laplace Conseil stated that energy (including coking coal) is the highest cost item for integrated mills. Even allowing for the recent coal price decline, energy is the cost component that has grown the fastest. According to Laplace Conseil, part of the solution to these challenges is technological: replacing part of virgin iron ore requirements by recycled scrap and part of coking coal requirements by shale gas. This means choosing DRI and electric arc furnaces (EAFs) wherever possible.
Laplace Conseil gave the exemple of Nucor which is building a DRI plant in Alabama in addition to its plant in Trinidad, while it has signed a 20-year contract for shale gas with Encana Oil and Gas Inc. to drill at "cost plus carried interest" all the gas needed for Nucor's operations. Nucor's flat product expertise coupled with its DRI experience will be used to enter the automotive sheet market and other high grade steel market.