As summer saunters through the dog days and prepares to
blend into the fall and the start of the fourth quarter, North
American metals producers are still traversing a rocky,
uncertain road to recovery despite some still-encouraging
signs, according to industry executives.
While demand is strong from the automotive, energy and
agricultural sectors, the steel industry continues to face
challenges of overcapacity, price volatility and a lagging
construction sector, they say. As a result, North American
producers arent operating at optimal capacity utilization
rates as supply and demand remain out of balance. Similar
issues continue to simultaneously excite and concern aluminum
Clearly, were not operating at rates that are
acceptable today, ArcelorMittal USA Inc. president and
chief executive officer Michael Rippey said at the Steel
Success Strategies XXVII conference in New York co-sponsored by
AMM and World Steel Dynamics Inc.
The issue is not really demanddemands not
great, but its not horrible, James L. Wainscott,
chairman, president and chief executive officer of AK Steel
Corp., West Chester, Ohio, said at the conference. The
issue is really too much supply.
On the aluminum side, Pittsburgh-based Alcoa Inc. lowered
its 2012 growth forecast for the North American heavy truck and
trailer industry to a range of 4 to 8 percent from 7- to
12-percent growth it had predicted in the first quarter, but
boosted its expectations for the automotive market.
Heavy truck and trailer is a mixed picture.
(Its) down compared to the view we had in the first
quarter. North America is really driving it, Alcoa
chairman and chief executive officer Klaus Kleinfeld said
during a conference call after announcing a second-quarter net
loss of $2 million. We believe heavy truck production
will slow down in the second half of the year and this will get
production in line again with lower orders.
Still, Kleinfeld maintains that truck and trailer demand in
North America will pick up, given the aging fleets. The
average age of the fleet today is 6.69 years. Thats the
oldest on record. The 20-year average is 5.85, so obviously
there is a need for replacement ... and that is going to drive
demand, he said.
Meanwhile, Alcoa raised its North American automotive growth
forecast to 10 to 14 percent from 7 to 12 percent previously.
(Automotive) is driven by North America, Kleinfeld
said. (If you) look at Junes seasonally adjusted
annual rates, it comes to 14.05 million vehicles, up 22 percent
year over year or 15 percent year to date. Thats pretty
The company maintained its bullish global aerospace
forecast. Our view has not changed. We expect 13- to
14-percent growth this year, driven by strong performance (from
the) commercial aircraft segment. We see about an
8,300-aircraft backlog, which at todays production is an
eight-year backlog. ... Thats pretty amazing,
It is very easy to tie the whole market to automotive.
But it is not just automotive. The stock market is fine, large
companies are making good returns, the construction market
hasnt gotten any worse, and agriculture, machinery and
transportationwhether its rail car, barge, truck or
trailerare going good, Thomas M. Marchak, vice
president of commercial at Severstal North America Inc., told
AMM in July. When I talk to colleagues in North
America, guys running their businesses are saying, Things
are good. They say, Im selling more steel,
but my margins are compressed.
Price volatility also remains a serious concern, according
to Mark Millett, president and chief executive officer of Fort
Wayne, Ind.-based Steel Dynamics Inc. (SDI). Buying decisions
are being affected by anticipated moves in raw
material markets, he said. This is a dangerous but almost
unavoidable strategy, facilitated in the near term by short
mill lead times.
Meanwhile, lagging demand from the construction sector
continues to be frustrating, Rippey said, and other
executives agreed, offering no forecast for improvement anytime
One move that might help in the long term came in July, when
President Obama signed into law a 27-month transportation bill
that provides funding for the nations roads, bridges and
highways at current levels through fiscal 2014. The
construction industry was hit brutally hard during the
recession, Obama said during a news conference.
This bill will keep thousands of construction workers on
the job to rebuild our nations infrastructure.
A number of market players, while celebrating the news, had
some concerns. It will be good for some who make road
mesh. Its good overall for infrastructure, one
trader said. The problem is that it is just too long for
the money and pickup in demand to come into the
One buyer said he was surprised that a long-term
solutionnine short-term extensions had been signed since
the last long-term funding bill expired in 2009was found
despite the political gridlock in Washington. Its
always disenchanting to watch what happens in D.C., he