Although the data provided by Thomas A. Danjczek, President of the Steel Manufacturers Association (SMA), during his presentation at SteelOrbis' regional event in Los Angeles, California on October 17 was not surprising to the steel insiders in the audience, his commentary--as well as the instant attendee feedback--set a unique tone on the current state of the US steel industry.
He began with a critique of conference presentations and economic forecasters, saying that every time someone says "we're just two quarters away from recovery," as people have been for so long, they are losing precious credibility. Danjczek was forthright in his inability to predict the future: "Although I'm usually right" about the fundamentals, he said, "I'm always wrong on the timing." Specifically, he said no one knows how China will behave in the near future, referring to the recent slowdown in activity after so many years of rapid economic ramp-up. Previously, China had accounted for about 80 percent of crude steel production growth in the world, but that trend would no longer continue, according to Danjczek . A major turning point, he said, would be in 2016, when the World Trade Organization's (WTO) review of China's membership will determine if they are still a "non-market economy"--if the WTO declares that they are not, it will be very difficult to implement antidumping and countervailing duties against them, even if the Chinese government continues to subsidize the nation's steel industry.
Soon after, an attendee interjected his observation of South Korea's subsidized steel industry, and asked Danjczek and the rest of the audience if a similar program might be beneficial in the US. A lively discussion ensued, with the general sentiment pointing to the unfeasibility of subsidies in the US steel industry, even though--as some pointed out--the US government already gives subsides to other industries such as oil and agriculture.
Another hot-button issue was the US' massive trade deficit, and many insiders' wariness that the US could export their way out of economic stagnation, as President Obama had recently suggested. Danjczek wasn't optimistic, pointing out that the US doesn't exactly have an abundance of extra steel to export. "We're the only market in the world that can't satisfy its own steel demand," he said, adding that when it comes to exporting on the world stage, the US isn't very "savvy"; American companies desiring instant gratification want to "jump in and jump out" of export opportunities, when successful export relationships are built on years of interaction.
Further on the domestic front, Danjczek discussed steel end-use sectors that are flourishing (automotive and manufacturing), and those that are just rumbling along at a steady pace, with few signs of strong improvement (construction). When an audience member suggested that public construction is doing quite well compared to private construction, Danjczek said that "being the healthiest patient in the cancer ward is not what I want to be."
However, Danjczek did point out opportunities for optimism, such as the overall low cost of scrap. Other than some regions having higher transportation costs and others having slightly lower labor costs, scrap is somewhat of a great equalizer in the world market. He also suggested that depending on the results of the US presidential election, the US steel industry might have much more to be optimistic about in the coming years. Although he didn't say who he already voted for by mail, it wasn't hard to guess; he did admit, however, that there was a general lack of effective leadership in Washington, D.C. (where he is based) on both sides of the political aisle, and if anyone thinks that there will be immediate, game-changing results after the election, they are seriously deluded.