As the keynote speaker at the Association of Women in the Metal Industries (AWMI) conference in Washington D.C. on September 29, Bob Holt, the Vice President of Sales and Marketing for ThyssenKrupp Steel USA (TK USA), provided attendees a brief overview of the steel market and the economic outlook, while delving into some of TK USA's challenges and triumphs in building a new steel plant in Calvert, Alabama.
Holt explained that the carbon and stainless flat-rolled operations in Calvert faced a number of challenges in the initial stages of construction. First there were the "Buy America" provisions which impeded the fact that the slabs used to produce sheet steel from the mill were largely being imported from the company's sister slab mill in Brazil.
Finding the best and most skilled workers (6,500 in fact) was also no easy feat, explained Holt. Prior to the recession in the US, there weren't many skilled workers in the area that were looking for work, or were willing to move down to Alabama to work at TK USA. But Holt said that the recession actually helped the company find the workers it needed because so many steel industry workers lost their jobs when the stock markets turned and steel demand plummeted.
Other struggles the company faced, and continues to face, are largely economic. GDP growth continues to disappoint; the unemployment rate is stagnant and other leading economic indicators "have lost their way." Consumer confidence is down 38 percent in the last eight months, he said, and total government debt, not just in the US but in Greece, Italy, Portugal, Ireland and Spain, continues to rise.
Additionally, there is the continued high cost of raw materials because of growing demand from China, which now makes up nearly 50 percent of total world steel production. Chinese mills are exporting a lot of steel, said Holt, but that steel "is coming less and less to the US"; only about 2 percent of Chinese steel exports go to the US.
Steel price volatility has also been substantial since 2009, resulting in "a change in the way people do business." Buyers are speculating less, and holding leaner inventories than they had in years past.
As for upcoming trends, Holt said that commodity hedging in steel will have to increase in the near term, and in the next 15 years there will be a lot more coal and iron ore becoming available. However, until 2015, the raw material supply will remain tight, and prices will stay high. It isn't until 2014-2015 that Holt sees the steel market getting back to pre-recessionary levels of steel consumption.
The most controversial part of Holt's presentation came during the question-and-answer portion, when he addressed the current issue of overcapacity in the steel market. Holt said that "we had fair warning the market wasn't going to be great when we came in," but "fortunately for us, we have a German parent with extensive experience in the export market." Holt said that the mill has been exporting a lot of the steel it produces at the mill, "relying more on exports than we thought we would."