Last year will go into the
record books as a mediocre one for most North American steel
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
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
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
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