NEW YORK Severstal North
America Inc. doesnt see the steel sheet market turning
around for at least another quarter because of global economic
uncertainty, import pressure and lackluster demand, its top
executive said. But some bright signs on the horizon, including
growth in the construction sector, could boost near-term buying
activity, he added.
"I dont think well
see a pickup in the second quartermaybe in the third
quarter or closer to year-end," chief executive officer Sergei
Kuznetsov told AMM. "Around this time of year, we
usually see the start of the construction season and restocking
in the marketplace, which normally leads to a nice upturn. ....
But were not seeing that. I think thats a sign that
this year isnt going to be very good overall, because we
have to deal with this uncertainty, low utilization rates in
the industry (and) high import pressure."
The Dearborn, Mich.-based
steelmaker saw its first-quarter production and sales volumes
rise quarter over quarter but fall year over year in the
absence of a seasonal uptick, Moscow-based-parent OAO Severstal
reported April 22.
Severstal North America produced
some 1.18 million tonnes of crude steel in the first quarter,
up 13 percent from the previous quarter but down 8 percent from
the same period a year ago. Production of liquid pig
iron jumped 22 percent to 488,889 tonnes quarter over
quarter and remained unchanged from the year-ago period.
Overall sales volumes rose 15
percent from the fourth quarter of 2012 to 1.11 tonnes,
including a 15-percent increase in hot-rolled coil and plate, a
12-percent rise in cold-rolled coil and a 17-percent increase
in galvanized and metallic coated coils. However, sales volumes
fell 9 percent year over year.
Average selling prices for the
companys rolled products slipped to $808 per tonne in the
first quarter, down 1 percent quarter over quarter and down 7
percent from the same period in 2012. Kuznetsov added that
decreases in the price of hot band were offset by a greater
share of higher-value and higher-priced products, such as
cold-rolled and galvanized steels, in the overall product
By sector, automotive and energy
end markets remain a bright spot for the steelmaker due to
continued strong purchasing volumes. "By far, this (automotive)
is the best market," he said.
Kuznetsov said that the company
is "working closely" with pipe manufacturers to supply
higher-quality grades of material, noting that a number of
domestic and foreign players have announced major expansion
plans for additional pipe and tube capacity.
"Were trying to offer new
pipe grades and the new characteristics required in hydraulic
fracturing," he said. "Were (also) completing trials in
the line pipe sector to get into the X70 API grade
Last year, Severstal announced
that it was studying the feasibility of constructing a
direct-reduced iron facility, suggesting a further step toward
vertical integration (
amm.com, Jan. 10, 2012). However, Kuznetsov said that
the company has no plans to move forward at this point.
"We decided against building our
own capacity at this point," he said. "Were more focused
on negotiating an off-take agreement to buy DRI from a
producer. But as a return on our investment, we decided against
building DRI plants in Trinidad or the United States."
On top of input expenses,
selling costs are also a concern to the steelmaker. Last week,
the company told customers that it would no longer sell against
a discounted CRU index price because the approach does not
properly reflect market conditions (
amm.com, April 18). Some sources say such a move will
help solidify the spot market.
"We informed our customers of
the shift out and away from the discounted practice," Kuznetsov
said. "We think its going to be the new reality in the
marketplace, and that this move should help us sell and get
fair prices that are more aligned with the situation for our
"I can tell you that well
offer firm pricing, well definitely honor all existing
contracts, and well go from there," he added.
Looking forward, Severstal NA
expects the U.S. market to remain a bright spot, particularly
as economic uncertainty and overcapacity plague places like
Europe and Asia, Kuznetsov said.
"Were bullish on the U.S.
market overall. I think this will be a difficult year, (but)
the U.S. market has structural advantages at this point," he
said, "Theres good restoration of the housing market, and
at some point, non-res(idential construction) will kick in.
"That will be the pivot point
for the industry, (because) thats probably the only
segment thats lagging," Kuznetsov added. "Mid-term and
long-term, we think this market will remain the most attractive
market in the world."