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Steel feeling construction drag; no relief near

Keywords: Tags  housing, U.S. Steel, Nucor, ArcelorMittal North America, Gerdau, AIST, American Iron and Steel Institute, AISTech 2012


NEW YORK — The U.S. construction market’s slow and unsteady rebound has prevented domestic steel mills from returning to high capacity utilization rates, and there’s no relief on the horizon, steel executives said during the Town Hall Forum at AISTech 2012, the Iron and Steel Technology Conference and Exposition in Atlanta.

While certain areas of the steel-consuming economy are back and booming, the construction sector remains a laggard, with serious negative effects on steel producers.

"That consumption needs to come back if we’re ever going to see our utilization rates get back above 85 to 90 percent," Michael S. Williams, Pittsburgh-based U.S. Steel Corp.’s senior vice president of North American flat-rolled operations, said.

David Sumoski, vice president and general manager of Nucor Corp.’s Marion, Ohio, steel mill, had harsher words. The building market is "pathetic," he said. "Now, it is improving, but improving from pathetic is still pathetic."

The building sector is coming back unevenly across the country, the executives said.

"In the U.S. market, we’ve seen different markets in different situations," according to André B. Gerdau Johannpeter, chief executive officer of Porto Alegre, Brazil-based Gerdau SA. He said the nonresidential construction was most robust, followed by infrastructural development, which he described as "lagging," and then, finally, by residential construction.

And while it might seem like a distant possibility now, Johannpeter said the industry had to be cautious about overheating in the future. "We have to think: Are we going to get back to those levels that were not real or too high at a certain point?" he asked.

Meanwhile, U.S. producers have been helped somewhat by an unusually warm winter. "We’ve seen a little uptick in activity earlier than we would normally from a seasonality standpoint," Williams said.

Still, he described the market as "at very low levels" and "anemic."

None of the executives said they anticipated a full recovery approaching anytime soon.

"While I would say every month is better than the previous month, we’re nowhere near 2007 levels of activity and demand,"according to P.S. Venkataramanan, chief executive officer of Luxembourg-based ArcelorMittal SA’s Long Carbon North America operations. "The meat of the whole business is commercial construction. Public spending has been nonexistent. We’re not seeing schools, we’re not seeing bridges, we’re not seeing major projects coming back."

The infrastructure spending that the industry needs to see isn’t solely limited to civil infrastructure such as roads and bridges, Venkataramanan said, citing electrical infrastructure as a prime example of an area in which the United States hasn’t yet invested sufficient resources.

In the meantime, the outlook for construction appears to be a a slow and uncertain climb, the panel agreed.

"(Construction is) the last to be affected going into a recession, and—as my sales manager reminds me every day—it’s the last to come out," Sumoski said.


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