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Steel supply chain facing risks: execs

Keywords: Tags  Metals Service Center Institute, MSCI, SSAB Americas, Charles Schmitt, Michael Taylor, Cargill Steel Service Centers, Kip Mostowy, Herr-Voss Stamco Gary Stein

PHOENIX — The steel supply chain is becoming more complex and more global, although the United States still has a number of recognizable bright spots, executives said during an industry panel at the Metals Service Center Institute’s Carbon Conference in Phoenix.

But these bright spots could be undermined by a number of risks, including overregulation and oversupply, steel executives from the equipment, production, service center and distribution supply chain warned.

In terms of demand, the energy sector continues to be among the strongest end markets.

"The energy market is pretty diversified, especially with the pipe and tank car industry," said Charles W. Schmitt, president of Lisle, Ill.-based SSAB Americas. "We’re also seeing some strength in transmission towers, so that’s good business for SSAB. We think that the one drag right now continues to be construction. Hopefully, we’ll see a pickup by the second half of 2014."

Others, though, were more grim in their expectations for nonresidential construction, saying that it’s the last major market needed to turn around before steel gets a significant pickup.

"The big disappointment in 2013 and entering into 2014 continues to be nonresidential," said Michael J. Taylor, president of Cargill Steel Service Centers. "I’m not quite optimistic yet on what 2014 will do, and I don’t know what will pull it out and give it a bump. I think that when it occurs—and it will occur at some point—it could get interesting for the steel and manufacturing economy."

But with certain bright end markets, that also means the need to become more competitive.

"Things are really starting to pick up, and it’s interesting to see that across the board with service centers, the majority of new investments is going toward adding capabilities instead of just adding capacity," said Kip Mostowy, president and chief executive officer of Herr-Voss Stamco, Callery, Pa.

Discussing government and regulation, Gary W. Stein, president of Houston-based Triple-S Steel Supply Co., said that while his business has not been affected directly, changes at the federal and state level are affecting the supply chain, which in turn affects his business.

"(Government regulation) is not affecting our company internally, but it’s affecting our customers and our suppliers. It’s hurting those in mining because new regulations have crushed the coal industry. It’s hurting energy customers because they can’t get permits as fast as they could’ve. It’s the aura of regulation on the whole economy," he said.

Outside of regulation, others pointed to concern over how the global markets are doing, particularly when it comes to a supply glut.

"The (global) steel industry is facing a sizable overcapacity and that will have to be addressed before any meaningful gain starts to take place within the industry," Schmitt said.

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