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Steel group chief optimistic

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American Metal Market asked Thomas J. Gibson, American Iron and Steel Institute president and chief executive officer, to address some key issues facing the U.S. steel industry as a new year and a new Congress get underway.

 

What does the new political climate mean for the steel industry as 2011 begins?

 

Gibson With more than 90 new faces in Congress, our first priority will be to educate the new members on the importance of the American steel industry and its role in strengthening the economy. We saw jobs as the main theme in the midterm elections and we hope the new Congress will implement policies that will promote job growth, not job destruction. We were very vocal in 2010 and will continue in 2011 to push for currency reform legislation, a repeal of the Environmental Protection Agency's regulation of greenhouse gases from stationary sources and a long-term surface transportation act. The new Congress must solve and reduce the nation's 9.8-percent unemployment rate. We know our industry can be part of the solution.

 

What are your public policy priorities right now, and which of these do you expect to become reality?

 

Gibson Key public policy priorities for the steel industry in 2011 include

•?Greater congressional oversight of economically damaging government regulations—like those proposed by EPA with respect to greenhouse gases—that will undermine the competitiveness of North American steel producers.

•?Enactment of a new energy policy that promotes development of domestic energy sources and provides incentives for industrial efficiency projects and support for efforts to develop breakthrough technologies that will allow the industry to move to a lower-carbon future.

•?Development of a more-effective U.S. trade policy to level the playing field as well as preserve and strengthen our nation's manufacturing base, in particular by addressing Chinese currency manipulation and other trade-distorting foreign government policies.

•?Passage of a new long-term surface transportation act to fund much-needed investment in transportation infrastructure.

 

In a recent AMM survey of the metals industry, most respondents said they do not expect the U.S. economy to become fully strengthened until at least 2014. When do you expect to see a robust and lasting recovery take hold?

 

Gibson That would be impossible for anyone to fully predict. What I do know is that we are seeing gradual, incremental growth in steel demand, increasing demand in particular sectors, such as automotive and energy, and improvement in terms of exports. U.S. steel shipments finished the year at 84 million tons. The outlook for the North American steel industry in 2011 is for a year of gradual progress in comparison to 2010.

 

The capacity utilization rate hit its all-time low in early 2009 at about 36 percent, then bounced up 24 points by the end of the year and another 10 points by March 2010. Some people were predicting 80 percent or higher, and by mid-year that looked possible, but in the second half it stagnated at between 72 and 67 percent. What's been happening recently, and what do you think can or will push it higher again?

 

Gibson The average capacity utilization rate for 2010 was 70 percent, which was consistent with our full-year expectations. Despite some variations, which you mention, we are seeing slow but steady improvement in the capacity utilization rate, which directly relates to similar slow but steady improvements we are seeing in steel demand. We expect the areas that will encourage continued improvement will come from the automotive sector, energy markets and exports.

 

What is your assessment of the current financial strength of U.S. steel companies? What about foreign-owned companies that perform significant manufacturing in America?

 

Gibson AISI producer member companies are global leaders in terms of efficiency, labor productivity and in overall performance. The Great Recession affected manufacturers worldwide, not just in the United State. At present, there is a sense of cautious optimism in the industry due to gradual, incremental growth in steel demand and because, prior to the recession, the steel industry was poised for growth. During the period between 1998 and 2003, America's steel industry strengthened from within through extensive consolidation, restructuring and capital investment. The new business model that emerged is one that has enabled us to compete effectively with fairly traded steel in the global marketplace. We are a leaner, more efficient and more resilient industry. AISI has a number of producer member companies with significant operations in America that are headquartered in another country. Their American facilities face the same market conditions as producer members do who are headquartered in the United States. All AISI member companies are extremely competitive. Whether headquartered offshore or in North America, our member companies share similar concerns regarding issues such as climate change, fair trade, safety and sustainability.

 

Which industry is the most important to a fuller steel recovery over the next couple of years—auto, construction, energy, other manufacturing or something else?

 

Gibson Construction markets represent about 40 percent of total steel shipments and cover sheet, plate and long products. The need to revitalize our infrastructure is urgent, and as soon as Congress sets in motion long-term infrastructure spending this market will begin to rebound.

 

What does the AISI offer its members—and by extension the industry as a whole—that makes it a good choice for steelmakers in today's climate?

 

Gibson We offer our members aggressive advocacy on their behalf to influence public policy, educate and shape public opinion in support of a strong, sustainable U.S. and North American steel industry. To do that, we

•?Focus on the advocacy of public policy issues central to the steel industry, issues where AISI can make an impact and issues where there is strong member alignment.

•?Inform and educate opinion leaders about the North American steel industry's strategic importance to national and economic security.

•?Communicate the benefits that the industry's technological advances are making to the health and safety of its work force and to the environment.

•?Collect and provide industry data to policymakers, company personnel and the public regarding steel operations, production, energy efficiency, shipments, import/export levels and consumption.

•?Pursue technology advancements through collaborative research and development.

•?Advance the competitive use of steel in traditional and growth markets.

 

What's the biggest concern about Chinese steel heading into 2011?

 

Gibson Slower domestic steel market growth is being forecast for this year, while China continues to have enormous steelmaking overcapacity. Given these factors—along with the state-owned, directed and subsidized nature of the China's steel sector—our biggest concern is the potential for large Chinese export surges of dumped and subsidized steel and steel-containing goods.

What threat do continued finished steel imports pose and what can be done to address it?

 

Gibson Because of the relative size and openness of the U.S. and Nafta (North American Free Trade Agreement) steel markets, unfairly traded steel imports are always a threat. This threat is of particular concern at a time of significant unused domestic steelmaking capacity in the United States and North America. The best way to address this threat is to preserve and enhance our trade remedy laws and to ensure that these laws are strictly enforced.

 

How is steel positioned as changes in sustainability emerge in the coming years? Do you believe it is currently a leader among primary metals?

 

Gibson Steel has lower environmental impacts than aluminum and magnesium, for example, energy use and carbon dioxide emissions, and is therefore the leader among these metals. Steel is 100-percent recyclable and more steel is recycled than aluminum and magnesium. Steel-intensive auto designs provide for the lowest-emitting vehicles because of the combination of light-weighting by using advanced high-strength steels and by the low emissions from making steel—aluminum and magnesium being many times the emissions of steel per ton of production.


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