Spirits ran high at the Metals Service Center Institute (MSCI) / American Iron and Steel Institute (AISI) Joint Annual Meeting at The Phoenician resort in Scottsdale, Arizona this week, with the general opinion held by the conference-goers and speakers at the three-day event being that the North American steel market will remain tight despite the apparent recession of the US economy.
The MSCI and AISI members also enjoyed each other's company, of which there was a lot given the strong participation: Robert Weidner III, President and CEO of MSCI, told the attendees that this year's meeting had a record attendance of approximately 600 individuals.
Harvard University Professor of Economics and President and CEO of the National Bureau of Economic Research, Dr. Martin Feldstein, kicked off the joint general session Monday morning with his US economic outlook, aptly titled "The Good, the Bad and the Not So Ugly." According to Dr. Feldstein, although the short-term economic outlook is not such a positive one, the long-term outlook is good, and the inflation outlook is "not so ugly."
Dr. Feldstein asserted that we are indeed in a recession, and it will carry on for at least several months. The recession is attributable to the events in the housing and credit markets including the housing price bubble between 2000 and 2006, the average high loan-to-home-value ratio, securitization of mortgages, as well as the lack of confidence among financial institutions which has resulted in a downward spiral of asset prices and capital. Now for the not so ugly: while Dr. Feldstein does not believe that the Fed's recent lowering of the interest rate will reverse these trends, he says that the weak dollar's continuing decline will help reduce the trade deficit, keep out imports and encourage exports.
Other notable sessions at the conference included a panel on raw materials, energy, and climate change, as well as a panel on the strategic challenges facing the North American steel industry, among others. Panelists included an array of big-name steel producer and steel service center executives including Daniel DiMicco, Nucor's President and CEO; John P. Surma, US Steel's chairman and CEO; Keith Busse, President and CEO of Steel Dynamics Inc., and Stephen Makarewicz of Ryerson Inc., among others.
In the raw materials panel, Mr. DiMicco echoed Dr. Feldstein's assertion about the benefits of the weak dollar, saying, "Export opportunities from the weak dollar will keep business going strong." Other opinions expressed among the steel producers on the panel were the need for increased raw material self-sufficiency among steelmakers, the importance of scrap substitutes, and the need to improve technology and efficiency.
On the energy situation, all of the panelists expressed their fears that we are potentially facing an energy shortage in the US, and that more energy supply and access are necessary. Nuclear energy was brought up several times as part of the solution, as was access to currently off-limits areas for natural gas drilling. As for climate change, while the panelists generally agreed that it is a serious problem that needs to be addressed, they were all emphatic that the solution needs to be a global one for North American industries to remain competitive with foreign competitors. Panelist Jose Martin, Executive Ferrous Director of Brazil-based iron ore giant Vale (formerly Companhia Vale do Rio Doce) agreed with the North American steelmakers' widely held view, stating, "The only way to cope with this problem is on a worldwide basis, not only locally. Everybody has to follow."
All and all, it is a time of mixed emotions in the North American steel market, as prices are rising, but there are the new challenges of rising costs, a slowing economy, along with the need to address climate change on a global basis. Keith Busse seemed to capture the general sentiment in the industry and at the conference when he said on the "Strategic Challenges" panel, "These are unusual times for the steel industry since I hear we're in a recession, but our order books are full. With exporting and the weak dollar, the industry will be in pretty good shape for some time to come."