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Struggling steel traders hope demand improves

Keywords: Tags  American Institute for International Steel, steel traders, David Phelps, Richard Brazzale, Coutinho & Ferrostaal, steel imports, steel exports, Catherine Ngai

NEW YORK — Steel traders hope that demand will pick up with more market certainty in the second half of 2013.

Traders squeezed by tight margins, uncertain markets and hesitant buyers of foreign material say that the trading community has struggled to keep business at steady levels in recent months. While 2012 numbers came in stronger at the start of the year, business activity has slowed down considerably since then.

"Thank God for the first five months of this year," Richard Brazzale, general manager of commercial operations at Houston-based steel trader Coutinho & Ferrostaal Inc., told AMM. "This (year) was so front-end-loaded, and we anticipated there would be a lull somewhere midyear, working up to the elections. Right now, things are quiet. I think the first quarter will also be pretty slow."

The first half of the year saw strong shipments of pipe and tube, reinforcing bar and hot-rolled coil, but those subsided considerably in the second half. While some sources cited uncertainty over the presidential election as a cause, others said that they saw bright spots.

"Usually, imports are seen as more important than exports. But we’re seeing a record-setting year on exports and, frankly, I’m stunned," American Institute for International Steel (AIIS) president David Phelps told AMM. "Particularly as problems in Europe and others have accelerated, I’ve been quite surprised at how well the export trade has held up. The world market has done a lot better than anticipated."

The United States imported 25.7 million tonnes of steel in the first 10 months of 2012, up 16.3 percent from 22.1 million tonnes in the same period a year earlier, according to U.S. Census Bureau data, while exports rose 7 percent to 10.7 million tonnes from 10 million tonnes in the same comparison.

On the policy side, one of the major items on the AIIS agenda is the harbor maintenance tax, a 0.125-percent federal levy on cargo values to generate funds for dredging maintenance. But port and shipping interests say that the estimated $6-billion surplus hasn’t been used as intended.

"The money should be earmarked, by law, to go back to the ports for necessary infrastructure-related maintenance. Dredging is the big thing right now, and the money isn’t going there. The concern is that perhaps, to a great degree, the funds have been used elsewhere," Brazzale said. "The more that the infrastructure at the ports are modernized, the more efficient it is to handle cargo—whether dredging or widening channels. Bigger ships, more economic vessels, can then access the ports and the customers further inland—it affects them, too; they’re indirectly paying for it."

Other items on the AIIS radar include the ongoing Trans-Pacific Partnership negotiations and a potential free-trade agreement between the United States and the European Union.

Looking forward, market stability will depend on how the government responds to certain pressing matters, including the fiscal cliff.

"There’s a lot of uncertainty right now. There are a lot of companies out there ... (that are not) going to make any investment decisions until (they) know what the framework in the new year looks like," Phelps said. "They’ve got money, but they’re waiting ... until the government tells them where the bar is. There are hundreds and hundreds of companies in the same position."

Brazzale agreed, saying that although business slowed in the second half of 2012 and is likely to do so in the first half of 2013, it may still return to normal before long. "The thing we can hope for in 2013 is just a reverse and mirror image of 2012 and have it back-end-loaded," he said. "We’ll have to see."

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