Flat-rolled mart said stuck in an oversupply rut
Mar 07, 2013 | 12:34 PM
| Jo Isenberg-O’Loughlin
NEW YORK Stuck in a rut. Spinning your wheels. One step forward, two steps back. Pick a phrase, any phrase: Virtually any combination of words that communicates the inability to move in a deliberate direction will do.
Late last month, Timna Tanners, senior research analyst at Bank of America Merrill Lynch covering the metals and mining sector, opted for the phrase "up the creek without a paddle" as the title of a presentation she delivered at an Association of Steel Distributors (ASD) regional meeting in New York. Addressing an audience of some 60-plus steel distributors and financial types, Tanners took only seconds to zero in on what she considers the overarching theme for steel sector participants the past couple of years: oversupply.
"There is too much steel," she said. "We are swimming in steel. How do we maneuver in an industry where there is just too much supply?"
Before addressing that question, Tanners touched on topics ranging from the coming revolution in domestic direct-reduced iron (DRI) capacityshe is predicting 29 million tons of annual DRI production capacity in the United States by the end of this decadeto the Chinese super cycle, which she thinks is over.
It didnt take long, however, for Tanners to return to the topic du jour. "We really think it is more about supply than demand right now with imports and excess production," she said. "And you dont get much pricing power until you get utilization above 80 or 85 percent." Average capacity utilization in the week she spoke was pegged at 76.9 percent by the American Iron and Steel Institute, although it has since inched up to 77.5 percent. ....
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