|
30 million ton gap that has historically been filled by imports.”
Ten years ago, those imports were a problem - and American steel manufacturers and the United Steelworkers of America were claiming that other countries, most notably Japan, were dumping steel at below-market rates in the United States. But imports of foreign steel have dwindled to a trickle and dumping is a thing of the past, according to Fitch.
“The Japanese aren’t dumping anymore,” he said. “That was replaced by the Chinese, but they’re not dumping anymore, either. The Chinese and the Indians were replaced by the Vietnamese and Thai and Malaysian mills, but they are not dumping anymore, either. There’s been a dramatic shift in the flow of steel into this country.”
According to Fitch, there are a number of factors that have caused this dramatic turn-around. First, the economies of some other countries are booming. Emerging nations like China, India and Brazil are all creating a huge demand for steel for everything from the manufacturing of cars to buildings to infrastructure.
Fitch says another factor people don’t hear as much about is the growing economies of Eastern Europe. According to Fitch, it has taken this long for the economies of the former Iron Curtain countries to resettle and begin to expand, and this is causing greater demand as well.
A third cause is the booming oil business. Steel is used in every phase of the oil business, from pumping it out of the ground to pumping it into the car, so high worldwide demand for oil means high worldwide demand for steel.
And finally, and perhaps most important, says Fitch, is the weak U.S. dollar.
“The value of the dollar has deteriorated on the global market relative to other currencies to the point that products manufactured in the United States are a real deal,” said Fitch. “The steel industry has not enjoyed this type of economy since 1946.”
Heidtman Steel Products is an Ohio-based steel processor with 11 plants in five states including one in Granite City, Ill. Bill Hudson, Heidtman’s commercial manager, describes the company as a middleman - buying steel from manufacturers, altering it and selling it to parts
|
manufacturers.
Hudson points to still another reason that the American steel business is enjoying a boom - consolidation. According to Hudson, the biggest problem that was hampering the American steel manufacturers before was not the dumping of cheap steel by foreign manufacturers, but rather the simple fact that there were too many steel producers in the U.S. and they were cutting each other up.
“You had the actual death and rebirth of the industry by consolidation,” Hudson said. “That happened back in 2003 - the final nail in the coffin - and now you have the Phoenix coming back up.”
Hudson says the business has been refined down to just three main manufacturers in the U.S. and they each have about a third of the business.
“The steel mills have consolidated their ownership structure both domestically and internationally,” Hudson said. “Because of that, they have pricing power that they haven’t had in decades. Because of that, they have been able to get at least a fair return and, in a lot of cases, a very strong return on their product over the past several years.”
While Heidtman is expanding its Granite City plant and making a large investment in equipment to improve the quality of its product, Hudson says the steel processing business today is similar to the steel manufacturing business 10 years ago. There are too many players; he expects there will be some consolidation at this level of the steel industry, too.
“You have a lot of money that’s come into these mills when they haven’t had any in the past,” said Hudson. “Consequently, you’re going to see them have to make investments to get a greater return for their investors. In my line of business, we’re concerned that they may move back into the steel service center business.”
Fitch says that demand for all of Alton Steel’s products is high, from pipes and flanges for the oil industry to steel for roads and bridges and other infrastructure. He doesn’t think that’s going to change any time soon.
“I don’t think you’ll see China or India or Eastern Europe or South America or the people of the United States willing to take a step back in standard of living,” he said.
|
