Everything has its ups and downs, and the market for
consumables-fluxing materials such as limestone, electrodes
used in electric furnace steel manufacturing and refractory
materials-is no different. But the highs and lows of the ride
can at times be enough to give some sectors whiplash.
Timothy Byrne, president and chief executive officer of U.S.
Lime & Minerals Inc., Dallas, watched his company's lime
and limestone revenue soar during the first nine months of
2008. What he saw as the third quarter drew to a close,
however, was more troubling. While demand for lime from steel
customers was strong through the first three quarters, the
company witnessed a sharp reduction in demand in October due to
worsening economic conditions.
"With reduced demand during these challenging economic
times, and our increasing energy costs, we must continue to
raise our prices to pass along these costs and improve our
gross profit margins," Byrne said. The problem that U.S. Lime
& Minerals faces, like other manufacturers and providers of
steelmaking consumables, is that steel industry consumers
aren't buying much. Steelmakers have drastically reduced
production since late September, thus scaling back their need
"It's a bit of a tough market right now," said David
Jardini, president of C/G Electrodes LLC, St. Marys, Pa., which
provides electrodes to electric furnace and ladle metallurgy
furnace operations. "There is a lot of capacity coming off
line. Production is down because demand for steel has come off
Rapid growth and development of the electric furnace
steelmaking route put a squeeze on the availability of needle
coke used to manufacture electrodes and drove prices for that
product higher, Jardini said. Needle coke prices increased at
least fivefold during the past three years, shooting up to
around $2,500 per ton from approximately $450. That prompted
electrode manufacturers to increase prices. "That's a difficult
situation," he said. "We were running on almost no needle coke
inventory. But now, with production coming off, availability of
needle coke is better."
But demand for steel hasn't improved. Some market observers
predicted steel production would be reduced by as much as 50
percent by January, based on overall demand weakness, with few
signs of a dramatic turnaround in the early months of 2009.
"It's one of those things that goes hand-in-hand with the
other," one mill buyer source said. "When you're not buying
scrap, you don't need electrodes to help in the melt. It's
pretty much that simple."
Philip Johnson, senior vice president of marketing and sales
at Pittsburgh-based Carmeuse Lime & Stone Inc., said lime
prices were basically flat from 1995 to 2002 and as a result
mining investment was restricted during that period. He now
looks at the current economic downturn as a temporary
interruption in demand and says efforts to expand lime capacity
now under way will pay off when demand returns to more normal
levels in the future.
"Right now the lime industry is reeling," he said. "We've
been hit like steel has and we are struggling to deal with the
downturn. We need volume (in the form of orders from
steelmakers) to be able to ramp up production."
Guenter Karhut, chairman and chief executive officer of ANH
Refractories Co., Moon Township, Pa., said prices for
refractory materials used to line steelmaking furnaces
increased about 250 percent from July 2000 to mid-2008. At a
fall conference, he said his company saw no shortages of
refractory raw material supplies and likely would add resources
in 2010 as prices were expected to begin to decline.