During the "Think Globally" panel at AMM's annual Steel Success Strategies conference in New York on June 18, Andre Gerdau Johannpeter, CEO of Gerdau S.A., suggested that despite recovery in the global steel industry, it might be time to change the name of the event to "Steel Survival Strategies." One of the many issues facing the industry, said Johannpeter, is the stifling overcapacity of steel. While he said that in the long term, "global population growth will drive steel consumption," right now there is simply too much steel and not enough demand. However, once demand starts to align with production, the question of who will drive supply will be vital. China, the world's largest steel producing nation, is the front runner at present, but things can change. For now, Johannpeter offered a few suggestions on how to cope in the near-term. Companies must adapt quickly; "The world is moving faster than ever," he said, "so you must keep up" by focusing on investing, customers and developing a raw materials strategy.
Thomas Veraszto, Senior Vice President -- Corporate Development of Severstal (filling in for CEO Alexei Mordashov), echoed Johannpeter's statement, noting that "our industry is much more experienced in fighting for survival than basking in success." He also agreed that overcapacity is a major problem, but he said it will likely continue for the next four to five years. Another way steel companies can continue to survive in the global market, he said, is to ensure that mining competitiveness is sustained. Overall, the forecast for iron ore and coal is positive, but Veraszto said resource depletion and merger and acquisition activity in the sector will have major impacts in prices and supply.
The theme of survival also infused the presentation by Kazuo "Mike" Fujisawa, General Manager of JFE Steel, as he likened the steel industry in Japan to the biblical character Job, who endured several trials of faith but never gave up. "Relentless misfortunes" have plagued Japanese steelmakers for years, but Fujisawa held out hope that the economic policies of Prime Minister Abe-dubbed "Abenomics"-will pay off in the long term. Already, he said, consumer and business sentiment is up, even though auto sales and construction activity are lagging due to a declining population. But in 2013, Japan's economy is forecasted to grow 2.7 percent, helped along by the "Abenomical" principles of hyper-easy monetary policy, flexible fiscal policy, and various steps to boost long-term growth.
Rounding out the panel was a presentation from John Lichtenstein, Managing Director -- Global Metals Industry Practice, of Accenture. Lichtenstein focused on the role of governments in the survival of the global steel industry, noting that "government intervention is a two-way sword." Intervention can be positive, such as the implementation of major infrastructure projects, but it can also hinder innovation and strangle businesses with regulation. In summary, he predicted that the steel industry still has a "long march ahead through a rutted road," a sentiment implied by the other speakers as well despite an undercurrent of optimism for the eventual future.