Michael Setterdahl: We are looking forward to a more stable and predictive market in 2019

Monday, 10 December 2018 11:59:19 (GMT+3)   |   Istanbul

Michael Setterdahl, Liberty Steel USA CEO, answered SteelOrbis’ questions regarding the newly-commissioned Georgetown plant and the outlook for the US steel market.

Can you tell us about the acquisition process for the Georgetown plant, Liberty’s first step into the US market? 

Well, it is our second step. We purchased a medium-size scrap operation in Tampa first. Actually, we had been looking at the Georgetown asset for a few years, but it was not until we finished an extensive assessment towards the end of 2017 that we made up our minds that we could made a difference. We are very excited to put our feet into the US market. Liberty has done very little trading with the US, so we are really new to the US market.

What is your product range and current capacity? Do you have any plans to expand this capacity? 

We are a silicon-killed steel producer with a range from 5.5 mm up to 15.5 mm for wire rod.  Our current capacity is approximately 500,000 mt per annum.

Successful companies always have “plans”; if there is a market, we will expand. We have a second electric arc furnace and a second ladle furnace that could start up in a few months. Our focus is to make high-quality products and partner up with our customers on reliability.  This is the only way to displace imports, which in some cases have been historically more reliable than domestic sources.

How do you see demand in your end-user markets?

Demand is good. Most of our target customers are running full. We do have concerns about increasing imports of finished steel goods that compete with our customers. In the run-up to the tariffs and quotas, there was an inventory build-up in long products, which has now worked itself through the system. We are looking forward to a more stable and predictive market in 2019. After all, 2018 was too much excitement.

How was Georgetown’s performance in the first few months of operations?

We are a start-up, much like a brand-new mill. We produced at first for stock to make sure that quality was fully checked before taking orders. The plant was still for three years and we have been busy training many new employees. Now we have 150 such, which is a mixture of previous employees, new hires from other producers and brand-new ones to the steel industry. We consider ourselves to be on target, even though we had 20 days down due to hurricane and flooding in September - which we survived!

Do you think there will be enough domestic demand, given the lack of imports from Turkey, so that Liberty Georgetown will consider producing rebar as well?

We do produce rebar in coil, but that will be 10 percent of our production, maximum. Rebar prices are still not exciting, even without Turkish imports. Rebar demand is okay, wire rod is better. We have no plans to make straight rebar. There is more domestic rebar capacity coming on line during 2019 and 2020.

Considering the Section 232 tariffs which prevent imports to the US, do you think your sales and prices will be positively affected?

We only hope that everything works out and that the US steel industry is stronger after it ends.

What are the main changes in traditional trade flows, especially in the long steel market amid rising protectionism? What further changes do you expect in the coming period?

Difficult to forecast: first we need to learn how the new NAFTA will work. Business is more regional everywhere. The exception is Turkish long products which go to every corner of the world it seems. I can see Liberty Steel Georgetown exporting to other countries close to the US in years to come. We are on the water!

How do you think the Section 232 tariffs have affected US domestic scrap consumption and what is your expectation for scrap prices going forward? 

Consumption has increased, but so have imports of pig iron, HBI, DRI, and scrap. it is a complicated forecast, knowing what affects what. I believe that metallic imports keep a lid on domestic scrap prices, and I believe that nominal Turkish C&F prices determine what goes to export ports and what stays inside the US. The more that stays inside, of course, causes scrap prices to stay low. Generally, there is a shortage of good scrap in the US and a surplus of “bad” scrap. The sorting of those two will need to improve.

Any final comments?

The most talked about ‘event’ is what will happen to consumption, to the willingness to hold inventory, and to imports and prices when the tariffs finally come off. I guess we will have to stay tuned in reading SteelOrbis…

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