Starting off the longs panel at SteelOrbis' Steel Scene conference in Houston, Texas on May 8, Mr. Ravi, Vice President Commercial for ArcelorMittal Long Carbon North America, touched on the major economic indicators that are affecting the steel market both in the US and abroad today. In 2012, Mr. Ravi said ArcelorMittal anticipates another year of slow growth, as although many key indicators are showing signs of promise, the underlying situation remains weak. Most recently the ABI indicated the highest spike in inquiries for new products since 2007, and the auto industry is a "true success story" at its current rate of recovery.
Looking to the raw materials side, Mr. Ravi explained that scrap supply/demand dynamics in the US have changed drastically in recent years. While the US used to export one-sixth of domestic scrap just three years ago, today one-third of US produced scrap is transported to foreign destinations, in turn resulting in less availability for US consumers.
The recent trend toward increased US scrap exports has led to a change in the dynamics that effect domestic scrap prices as well: trends in the export market now dictate US domestic scrap market prices. In addition to rising exports affecting scrap supply in the US, Mr. Ravi noted that fewer buildings are being demolished than in years past, and the age of the average American automobile remains high.
Turning specifically to wire rod, he said that China produces triple the wire rod domestically in just one month than the US produces in an entire year--if China stops consuming wire rod for just half a month and decides to export, the US will be in "deep trouble" for about two years.
During the question-and-answer portion of the panel, he addressed the surprising decision by the US ITC in late April that galvanized steel wire imports from China are not materially injuring the domestic industry. The ruling in that case "sends a signal to the market," Mr. Ravi said. Finally, he voiced concerns over the level of imports coming into the US, and said the sporadic increases we have been seeing, especially as of late, are one of the major headwinds facing the US long product market today.
Following Mr. Ravi, Frank Bergren, Vice President of rebar fabrication and distribution company Metal Partners Rebar, tackled the import versus domestic rebar market in his presentation, citing that in just the first few months of 2012, imports increased 52 percent over the same period a year ago. Bergren presented a chart indicating the conversion costs from scrap to a finished rebar product, which he said is approximately $180-$200/net ton, but looking at Turkish scrap prices, Turkey is converting scrap to rebar for approximately $130-$155/nt; Bergren begged the question as to whether or not this is a fair trade practice. Due to the recent surge of import rebar products into the US, he explained that Nucor has been publicly announcing over the last few months that they may file a suit against Turkish rebar, and "we know they're very serious," Bergren said.
Later, during the question-and-answer portion of the panel, Bergren discussed that in 2011, imports largely went to coastal regions, but so far this year, import material has been making its way upstream to Midwest regions more and more. Nowadays, the "rebar market is much smaller than five years ago," he concluded.
Next, Bernd Neuenkirchen, Vice President of Wire Rod Trading, Coutinho & Ferrostaal Gruenstahl, also took a close look at imports of long products into the US, conceding that while there was a rebar surge at the beginning of the year, the trend will not last long as the year progresses. Even so, in January and February, Turkey exceeded Canada as the US' number one import source for long products. Prior to this year's surge, there have been major dips in the US' imports of longs from Turkey: in July through October 2011, there were little to no Turkish imports arriving. But during those four months, imports of Mexican rebar spiked. Murat Eryilmaz, CEO of SteelOrbis, who moderated the panel, commented that that Turkey was "badly burned" by antidumping from the US in 1997, and would rather not export to the US for extended periods of time than risk being accused of dumping, partially explaining the gaps in Turkish import arrivals last year.
Neuenkirchen went on to explain that imports of wire into the US used to be much heavier. Interestingly, even after the earthquake and tsunami in March of last year, Japanese exports of wire to the US did not slow. Aside from Turkey, the US does not import substantial levels of wire rod from Europe, but when the European market is slow, the UK exports to the US. The most recent import trend in wire rod has been the return of China--US Steel Import Monitoring and Analysis license data show 20,000 mt of wire rod from China in April. More and more US traders have been "talking to Chinese mills," he said, but the Chinese presence won't be nearly as prominent as during 2007 and 2008.
Despite the renewed presence of China in the US import wire rod market, Neuenkirchen doesn't expect any dumping cases on wire rod--the domestic mills' activity has been strong enough and they have been able to fill their order books, he said. Additionally, compared to the recent increase in rebar imports, wire rod arrivals are relatively minor.