NEW ORLEANS At least two
stainless steel melt shops in the United States could close in
the next three years as the global market corrects for
overcapacity, Steel & Metals Market Research GmbH (SMR)
managing director Markus Moll told delegates at the annual
conference of the International Stainless Steel Forum (ISSF) in
The flat products sector would
likely see capacity rationalization in most regions over the
next few years before demand improves in the latter part of the
"In Europe, we see mostly
reductions until 2016, and only in 2018 and 2019 do we think
the market will need more capacity. So it would be good for
some of the producers not to scrap the furnaces that (they) are
not using now, but to leave them sitting there until 2020," he
"In North America, we have the
addition of Outokumpu (Oyj)s Calvert, Ala., plant last
year, but we also see reductions in the United States," Moll
said. "We see at least two melt shops being closed down."
While China is expected to
continue ramping up its production capacity through 2020, this
will eventually lead to a situation in which "the Chinese are
not necessarily the cost leaders anymore," he noted.
"In 2020, there will be
producers that have capacity to produce over 5 million tonnes
of stainless, but this volume will not bring you cost
advantages anymore," he said.
"I think we will go to a
regional market," Moll said. "Were already in a situation
where 80 percent of stainless consumed in a region is also
produced in that region. I bet you that in 2020, this global
selling will become less (common) and import penetration will
have peaked out."
The beginnings of this trend can
already be seen with "cost buyers" like Wal-Mart and Ikea,
which he said are increasingly sourcing their stainless
cookware from local fabricators.
However, Moll noted that even
though the global stainless market has grown over the past few
years, the industry has struggled to convert that into
profitability. Market capitalization figures show that "nobody
is worth what they should be worth," he said.
"AK Steel (Corp.) you can buy
today for less than $500 million. Outokumpu is somewhere around
1.5 billion euros ($1.9 billion). These values by no means
reflect the true values of the companies, of course," he said.
"At the moment, Im surprised that there are not more
financial investorsmaybe private equity companies or
Russian oligarchsthat are looking at this business and
buying themselves a true bargain."
Companies looking to increase
value by concentrating more on lower-volume specialty segments
than commodity grades also run the risk of trying to "be
everything to everybody," Moll said.
"You cannot do everything from
your one production system," he said. "If you want to
participate in high-value segments, you need to separate it
from your high-volume operations, maybe through a separate
company. You cannot produce heat-resistant grades or super
duplex in the same line where you want to be competitive on
304. It doesnt work."
Moll believes the U.S. stainless
market has survived the global economic slowdown better than
the European stainless market partially because of its heavy
reliance on a service center distribution system that is
separate from producers, he said.
"When you look at the big
distributors here, they have supply bases which they do not
change with every e-mail they get from China. They stay
long-term with the same suppliers, though they may change
volumes a little here and there," Moll said. "I think a
mill-owned distributor is not as efficient as a family owned