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AUTO Fuel costs are weighing on mills’ minds

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Producers of flat-rolled steel expect 2007 to be a decent year in terms of supply to the automotive market, but many are wary of lightweight substitutes and the impact they could have on steel sales.

"We think '07 will be an OK year for steel sales to automotive," Michael Wagner, chief commercial officer of SeverCorr LLC, Columbus, Miss., said. "We're looking at vehicle builds in the range of 15 million to 16 million. Automotive definitely has slowed a little, but at that rate the market would be OK."

SeverCorr's Michael Wagner
SeverCorr's Michael Wagner
Vehicle builds, naturally, are the key indicator used by steel producers to determine how much steel their automotive customers will consume in a given year. The number of builds has a direct impact on the amount of steel sold, but with projections for 2007 builds around 16 million, most steel producers view the market as steady, albeit down a bit.

"Any increase in demand from automotive customers is based mostly on demographics," Daniel R. DiMicco, chairman, president and chief executive officer of Nucor Corp., Charlotte, N.C., said. "A lot of what happens depends on the economic state of the country. Right now we don't see a huge increase coming in automotive sheet consumption."

DiMicco cited a potential wild card in the automotive market a public desire for lighter, more fuel-efficient vehicles. As more of those types of vehicles are produced, he said, the potential exists for the amount of steel used by automakers to slip.

The automotive application program of the American Iron and Steel Institute's Market Development Committee is attempting to make inroads to ensure steel doesn't lose market share, even if vehicles get smaller and lighter. And the committee is having some success in pushing the use of lighter, advanced high-strength steels in automotive construction; high-strength steels comprised an average of about 415 pounds of vehicle weight in 2006, up 18.2 percent from 351 pounds in 2001.

Wagner says consumer confidence holds the key to the market. The SeverCorr mill, which is slated to begin operations this summer, has pinned much of its growth plan on an ability to sell steel to the so-called "new domestics"—the growing number of foreign automakers who have built, or are planning to build, manufacturing facilities in the southeastern United States.

"Right now, I think it's fair to say consumer confidence is a little shaky—it's certainly not going gangbusters—so we see things tightening up a little," Wagner says. "We think it will be a solid year, but not spectacular by any means."


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