PALM DESERT, Calif. Service center sources say they are somewhat less sanguine than some industry analysts at the prospect of another major entrant into the domestic flat-rolled steelmaking market.
The impact of steelmaking veteran John D. Correntis proposed Big River Steel LLC project in Arkansas might not be as benign as IHS Global Insight Inc. has indicated, members of the Association of Steel Distributors (ASD) said at its recent annual convention. Analysts at Lexington, Mass.-based IHS recently wrote that the U.S. market can likely absorb output from the $1.1-billion, 1.7-million-ton-per-year flat-rolled facility, provided additional capacity doesnt also come onstream (amm.com, March 26).
While distributors say they are generally positive about the outlook for steel demand, and many agree that manufacturers are actually returning to the United States, theyre not altogether confident the reshoring trend will be sufficient to soak up domestic production capacity anytime sooneven without Big River Steel in the picture.
"Do I see manufacturing coming back? Yes," said James P. Bouchard, chairman and chief executive officer of Sewickley, Pa.-based Esmark Inc. "But will it keep pace with the amount of (steel) product being produced here? I dont think so."
Bouchard said that despite the shutdown of former steelmaker RG Steel LLCs Sparrows Point, Md., and Warren, Ohio, furnaces, "there hasnt even been a blip" in terms of competition easing among producers. Existing mills are determined "to hold their (market) share," he said, and that doesnt account for such proposed new players as Big River.
Moreover, another steel industry shakeout could be in the cards "capacitywise," said William M. Hickey, president of Lapham-Hickey Steel Corp., Chicago. He compared todays domestic steel environment to the first years of the new century, when steelmaking was plagued by excess capacity and populated with "weak sisters," which resulted in massive restructuring and bankruptcies that forced the disappearance of some of the industrys oldest names. This time, said Hickey, he wouldnt be surprised if "every legacy producer in North America wont have to go through some reorganization process."
Keith Busse, chairman of Fort Wayne, Ind.-based producer Steel Dynamics Inc. and a panel moderator at the ASD conference, said the best way to promote greater domestic steel demand is through both reshoring efforts and a return to annual increases "north of 3 percent" in the U.S. gross domestic product (GDP), especially after GDP rose just 2.2 percent in 2012. But even given these conditions, and despite the loss of industrial capacity in recent decades, the United States is "still the place to be" for manufacturing in the future, Busse said.
Meanwhile, Heidtman Steel Products Inc. president Tim Berra noted that, with service center customers increasingly seeking "one-stop shopping," the Toledo, Ohio-based company is "partnering more with our competition." For example, he noted that Heidtman invited fellow distributor Steel Warehouse Co. to set up shop on its campus in Cleveland.
"Why? They were coming anyway," he said about the South Bend, Ind.-based distributors move to Cleveland, pointing out that each firm performs a specialized role for customers in that market. "They do the cut-to-length and we do the pickling."