Last year will go into the record books as a mediocre one for most North American steel companies.
Among the more significant developments, the radical course change by Germanys ThyssenKrupp AG, which led to its planned sale of the huge Brazil/U.S. venture, will stand out, and the bankruptcy and dissolution of RG Steel LLC also was a landmark event, ending with the sale of three steel plants to what are essentially liquidators.
Elsewhere, Luxembourg-based ArcelorMittal SA was confronted by a threatened nationalization when it tried to shut down its Florange, France, steel plant; U.S. Steel Corp., Pittsburgh, handed over its steel plant in Serbia to the government for $1, and signaled its intention to withdraw from Slovakia; and Chinese steel capacity growth moderated.
While profitability was mediocre, the U.S. industry performed much better at a 75-percent operating rate than in the past.
Steel companies around the world continue to find investments in the U.S. market particularly attractive. Finlands Outokumpu Oyj, which on Dec. 28 completed the purchase of ThyssenKrupp Stainless USA LLCs plant at Calvert, Ala., is the latest in a long line of foreign steel companies to have invested heavily in the United States. The American steel industry now includes companies with roots in Brazil, Canada, Finland, India, Luxembourg, Russia and Spain.
In contrast to this externally fueled growth, native American companies seem to have concentrated their investments to secure upstream raw material sources: Nucor Corp., Charlotte, N.C., and Fort Wayne, Ind.-based Steel Dynamics Inc. are building or starting up ventures intended to strengthen their raw material posture; AK Steel Corp., West Chester, Ohio, has invested in both coal and iron ore; and ArcelorMittal, which has such a large U.S. footprint that it might be considered native, also is concentrating capital on upstream integration. Note the relatively cautious policies of the native U.S. companies vs. the expansionary activity of foreign-based steel companies. Do the foreign companies see something that the locals are overlooking?
The boom in oil and gas activity is certainly concentrated in the United States for now, but much of this foreign investment isnt specifically related to products that serve that industry. It will be argued that the current devaluation of the U.S. currency is a reason that investment is attractive now, but this policy of foreign investment in the United States has been going on for 30 years. Perhaps the ultimate disposition of the high-quality ThyssenKrupp steel assets now up for sale will shed new light on acquiring steel companies intentions, as well as their long-term judgments on the U.S. market for steel.
Thomas C. Graham is a founding member of T.C. Graham Associates. He is a former chairman and chief executive officer of AK Steel Corp., president and chief executive officer of Armco Steel Co. LP, chairman and chief executive officer of Washington Steel Co., president of the U.S. Steel Group of USX Corp. and president and chief executive officer of Jones & Laughlin Steel Co. His column appears monthly. He invites readers comments and can be contacted at firstname.lastname@example.org.