At the 53rd annual meeting of worldsteel (World Steel Association) held in Monterrey, Mexico, a panel discussion moderated by Dr. Edwin Basson, director general of worldsteel, and including the participation of John Ferriola, chairman, CEO and president of US-based Nucor Corporation, Guillermo Vogel, vice-chairman of Luxembourg-headquartered steel pipe and tube producer Tenaris, and Gustavo Werneck Da Cunha, CEO and president of Brazilian steelmaker Gerdau S.A., discussed the steel markets focusing in particular on demand from the oil and gas segment in the Americas.
Gustavo Vogel commented that in terms of the drivers that he sees in the future, one major element is going to be energy in Mexico. He said he expects to see a lot of infrastructure demand driven by energy. Regarding the issue of how to integrate the south of Mexico better into the national economy, one of the main elements is to really take energy to the south, he said, adding that the construction of pipelines was needed, while mentioning the planned $8 billion refinery due to be built at the Gulf port of Dos Bocas. “I see Pemex (state oil company) moving forward very aggressively with investments, with drilling in Mexico. Drilling by Pemex has almost doubled at present,” he said. He added that this focus in terms of taking infrastructure to the south of Mexico is going to be seen, though maybe not in 2020.
In response to a question from Edwin Basson regarding the forecast for steel consumption in the oil and gas industry, Nucor’s John Ferriola said it is positive. “I hate coming back to the political side, but it depends on what happens in the election. If the Republican Party and the current administration remains in power, you will see a greater focus on drilling and that will be good for steel consumption in the oil and gas arena. On the other hand, the opposing party is very liberal and there’s a lot of opposition to drilling, in many areas, offshore and onshore. So, depending on what happens with the election next year, it could have a major impact on steel consumption in oil and gas.”
The worldsteel director general Basson went on to ask Ferriola whether steel demand from the energy sector in the US is above or below the estimated global average of three percent.
“I think that it might be just a little bit higher, particularly with what has happened over the past few years in the drilling environment. Again, what happens going forward, will be very largely determined by the political outcome next year,” Ferriola responded.
Commenting on the situation in Brazil, Gustavo Werneck Da Cunha remarked “The oil and gas energy market has started recovering recently. We are very optimistic about the near future. But the biggest problem in Brazil is the infrastructure. So we also need massive infrastructure projects in Brazil to close the gap that has opened up over the years. And the question is: where is the funding for those projects? That is why it is so important to speed up privatization ....in Brazil in order to move all those infrastructure projects to the private sector.”
Again returning to the issue of Mexico, Mr. Vogel stated, “When you see the dynamics of the industry in Mexico we see Pemex increasing very heavily their investment .....It is interesting to think that by the second quarter next year private drillers are going to account for half of the drilling in Mexico. So drilling is going to be a very positive element for steel consumption in Mexico. Then I mentioned the pipelines. I think that you are going to see strong activity also in terms of pipelines. We are going to have a new refinery.” He thus concluded that energy would be a big driver of steel demand in Mexico.
Edwin Basson commented that maybe not next year, but certainly in the next three to five years, some of these steel flows from energy would start coming through into the market, certainly in Mexico, and potentially in Brazil, and maybe sooner in the US. Vogel stated that the new president in Mexico is very much oriented towards energy and oil, and added that ensuring the financial equilibrium of state energy company Pemex would be a priority.