Steel Manufacturers Association President Philip Bell talked to SteelOrbis:
2021 was a transformational year for steelmakers in the United States. The industry had record profits, strategic M&A activity, and a continued commitment to investing in people, processes and equipment.
Despite the challenges brought forth by the coronavirus, supply chain disruptions and trade disputes, domestic steel producers continued to innovate and create a steel industry that serves as the model for the rest of the world.
Between 2021 and 2023, there will be over $16 billion dollars of investment in steel capacity that is recently commissioned, near completion or announced. This represents approximately nine million tons of new and efficient steelmaking capacity that will allow American steel producers to continue to pursue electrification, decarbonization and modernization of its steel industry.
One of the big takeaways in 2021 was the industry’s focus on decarbonization. US steel producers produce steel with the lowest carbon intensity in the world. Steel produced in the US is produced at half the CO2 intensity of steel produced in India and China. According to the Climate Leadership Council, the US steel industry is 75% to 320% more carbon-efficient than global producers, depending on the product segment.
While there are multiple routes to decarbonization, the US steel industry is structured in a way that already uses proven technologies that lead to its superior environmental performance. Over 70 percent of steel in the country is made via the EAF route or via the EAF route combined with DRI, natural gas, renewables or other ore-based metallics. Also, US blast furnace producers use pelletized iron ore to create lower-emission steel products.
Increasingly other regions of the world are trying to make their steel industries look more like the US steel industry by using incentives, subsidies and government intervention to increase the amount of EAF-produced steel. As we move forward, it is critical that US steel producers turn their carbon advantage into a competitive advantage.
There is cause for both optimism and concern in 2022. US steel producers will continue to be more efficient and offer next-generation product offerings, but the growth of EAF production domestically and globally has the potential to put pressure on the demand, price and availability of raw materials such as prime scrap.
Recently, we have seen steel companies position themselves to deal with this issue. In 2021, Cliffs acquired Ferrous Processing and Trading Company (FPT) and North Star BlueScope acquired MetalX, LLC to help mitigate potential prime scrap shortages due to new flat rolled EAF-based capacity coming online.
But more importantly, we must also address the growing problem of scrap export duties. No country is 100 percent self-sufficient in every raw material. Many ferrous raw materials are traded every day in very large volumes between countries, and so export duties on such materials are particularly disruptive to global supply chains. We hope that all countries would aspire to have free and fair trade of ferrous raw materials that is WTO-compliant.
On the trade front, we must ensure that alternative deals to the Section 232 tariffs are fair, workable and enforceable. At a time when imports and capacity are increasing, the US must negotiate deals with its trading partners that make sense. As of November 2021, year-to-date imports are up 44.6 percent.
At the SMA, we applaud the recent agreement between the US and EU to implement a tariff-rate quota (TRQ) under Section 232 on steel products imported from the European Union. We are particularly pleased that only steel melted and poured in the EU will benefit from this alternative arrangement. We also are encouraged by the agreement’s focus on global steel industry decarbonization. These two factors should be cornerstones in future Section 232 negotiations with other countries, such as Japan and the UK.
For 2022, we remain optimistic that the US Congress will pass an infrastructure bill that will focus on traditional, steel-intensive infrastructure investment that spurs steel demand, particularly for long product producers. Supply chain issues such as the chip shortage may also extend demand cycles for flat rolled steel in certain industries like automotive.
Sensible alternatives to Section 232 tariffs that are pursued in a measured and methodical way should limit market disruptions as long as they continue to focus on melted and poured requirements, environmental stewardship, and minimizing the impact of product exclusions.
Cautious optimism should be the approach going into 2022. On the positive side, we have seen iconic American companies like Nucor, Steel Dynamics, Commercial Metals, Cliffs and US Steel make savvy investments and market moves in 2021. This will lead to more efficiency, increased product offerings and a cleaner, greener steel industry.