Auto strength reason to invest: Severstal exec

NEW YORK — The U.S. steel industry has reason to celebrate as a multi-year-strong automotive industry is not only boosting sheet demand, but also allowing for advanced innovation, according to an automotive executive at Severstal North America Inc.

Automakers in the United States have reported stronger sales volumes in recent months due to robust demand, stable gas prices and an improving job market, which has effectively helped order books for steelmakers focused on that market, such as Dearborn, Mich.-based Severstal NA.

"It’s pretty optimistic anywhere you look. The sales forecasts are up and June numbers are higher than they’ve been for a long time," Christopher Kristock, Severstal NA vice president of quality and product development, told AMM in an interview.

Earlier this month, the top seven automakers in the United States reported June sales of nearly 1.21 million vehicles, up 8.8 percent from the same month last year. At least one automaker said it experienced the best sales month since September 2008 (amm.com, July 3).

But while selling steel to the auto industry is good for Severstal NA, it’s also trying to get ahead by tapping into the advanced high-strength steel sector, a product increasingly demanded by automakers for lighter, stronger and more reliable material.

"The next generation of ultra-high-strength steel requires specialized processing equipment that doesn’t exist in very many locations in the U.S.," Kristock said.

One investment the company is hoping to make is in a new continuous annealing line (CAL) at its Dearborn operations to produce advanced ultra-high-strength steel. The company lost out on a controversial Department of Energy loan early last year but has since reapplied in an effort to underwrite the planned $320-million CAL line (amm.com, June 27, 2012).

But the competition looks fierce. In May, U.S. Steel Corp. and Kobe Steel Ltd. commissioned a new 500,000-ton-per-year CAL at their Pro-Tec Coating Co. joint venture in Ohio. The $400-million line is intended to meet future demand in the automotive industry and help automakers meet new fuel standards (amm.com, May 13).

"We’ve already completed two-thirds of the modernization in Dearborn, which is the most modern facility operating at full scale and supplying automotive needs in North America," Kristock said. "The last one-third is the CAL line. It’s very similar to the U.S. Steel Ohio facility. We’ve had a vision for that same line even before they did as part of our three-phase modernization. We’re spending a lot of time trying to find a competent partner to go together with to build this line. We still think this line is the key to automotive supply."

But Severstal NA’s competition in the auto space isn’t limited to its steel counterparts. Aluminum players are inching their way into the sector by providing a lighter weight alternative.

Kristock said that while increased aluminum in cars is likely, steel players will survive. "It’s just a market debate. I have talked to a lot of automakers myself, and I can’t not tell you that there isn’t going to be more alternative metals used in future vehicles," he said. "But I think it’ll be a balance. It won’t be all steel or all aluminum. Car companies will make those decisions based on efficacy and steel application ... and it’ll just make us work that much harder to make more solutions for steel."

Looking forward, Severstal NA aims to focus more on its facility in Columbus, Miss., to capitalize on the growing automotive manufacturing facilities in the region.

"Our outlook for the future is very bright both in the upturn of the market and construction ... which is benefiting our southern works in Columbus," Kristock said. "We’re entertaining more automotive customers at that mill (and) using our northern experience now fully applied at Columbus. It’s a good mix for us—North and South."


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