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Higher steel output to help US: study

Keywords: Tags  steel, steel output, scrap, scrap exports, Alan Price, Thomas Danjczek, Steel Manufacturers Association, SMA American Scrap Coalition

MIAMI — Boosting U.S. steel production while consuming raw materials, such as ferrous scrap, domestically rather than shipping them overseas will shrink the U.S. trade deficit while generating more tax revenue, according to a joint analysis by two trade groups.

"The key conclusions of this analysis ... based on standard modeling is that if we were to increase steel production, it would create tens of thousands of new jobs, add billions of dollars to GDP (gross domestic product) and reduce the trade deficit," Alan Price, president of the American Scrap Coalition and partner at Washington-based Wiley Rein LP, told executives Jan. 24 during a presentation at the Steel Manufacturers Association’s (SMA’s) annual board meeting, held in Miami.

Between 2006 and 2011, U.S. steel production averaged some 15.9 million tonnes less than consumption each year, according to the study by SMA and the coalition. By increasing domestic steel production to fill that gap, some 99,000 new jobs could be created in the steel industry, according to the study, which is scheduled to be released in the coming days.

Increased domestic production could reduce the U.S. trade deficit by some $9 billion and generate more than $800 million annually in tax revenue, according to Price.

Currently, monthly U.S. steel imports are almost double that of U.S. exports, according to data from the U.S. Census Bureau.

Encouraging the use of domestic scrap instead of exporting the material could be a win-win situation, Price added.

"Not all exports are beneficial to the economy. In this case, increased domestic steel production might lead to decreased U.S. scrap exports," he said. "Overall, though, you would get a net economic benefit because the trade deficit numbers would fall. (In addition), steel imports would also fall by much more than the value of scrap exports. The bottom line is that the increase of domestic consumption of scrap would benefit the domestic scrap industry."

Steel interests have noted that natural gas, including shale gas, has increasingly helped U.S. steelmakers gain an advantage over foreign counterparts in the global market.

Steelmakers need to capitalize on the advantage by consuming domestic raw materials rather than sending them overseas, SMA president Thomas Danjczek said. "The message we’re saying is, ‘Why not make it here?’" he added.

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    Jan 28, 2013

    Not sure if this is correct, but Economics 101 stated for every supply there must be demand. True demand has been outweighed by over supply in the steel industry the last 5 years. Yes increasing productivity will consume more products domestically, but the revenue for over producing those products will be net losses to the corporation to sell those products. Thus causing a spiral effect of net losses for the mills, their suppliers and the distributors. Too much steel, and not enough buyers. The loss of jobs would far outweigh whatever had been created in the ramp up.

    Jan 25, 2013

    I've been sharing this view for years in my comments at Steel Industry meetings. The problem is the lack of political will to encourage this, and the mills are reluctant to proceed without at least a modicum of Fed support

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