Steel industry leaders need to make strong moves to
combat chronic overcapacity and low profit margins, according
to Cambelle-Inland LLC chairman Craig Bouchard.
"From the leaders of
the steel industries, we need significantly different action.
We need big changes or the steel industry is not going to
regain its health from a return-on-investment perspective,"
Bouchard said in a presentation at the Steel Success Strategies
XXVIII conference in New York, sponsored by AMM and
Englewood Cliffs, N.J.-based World Steel Dynamics Inc.
He cited overcapacity
in the global steel industry as one of the major issues
squeezing profit margins, and challenged steel leaders to adopt
a novel approach to address the problem.
Global overcapacity is
estimated at 334 million tonnes, according to Morgan Stanley
Research data, including 200 million tonnes in China.
Worldwide steel output
is likely to grow around 3 percent per year over the next five
years, the same rate as steel consumption, Bouchard said,
meaning that overcapacity will persist unless action is
The traditional method
of solving overcapacity is through consolidation, but there
arent enough healthy steel companies to aggressively buy
unhealthy companies, he said.
Bouchard declined to
comment on action that particular companies should take, but
said the markets problems were long-term structural
issues rather than cyclical business challenges, with changes
needed industry-wide. Bankruptcies could reinvigorate the
market, for example, he said.
might continue to be an insoluble issue, he said. "If the
Chinese just shut down 200 million tonnes of production we
wouldnt have a problem. But its not going to