NEW YORK Lackluster demand, low inventory restocking and global overcapacity will likely keep the U.S. plate sector at low but stable levels, according to SSAB Americas top executive, although positive data indicates that the slump might not last for long.
"We have a bit of a depressed demand right now from a plate standpoint; when you combine the import share of cut-to-length plate and plate-in-coil with current domestic production, certainly we have an overcapacity issue," Charles "Chuck" Schmitt, president of Lisle, Ill.-based SSAB Americas, told AMM. "Then when you expand upon that globally, particularly in Europe and increasingly in Asia, then the overcapacity is sizeable."
Plate demand this year has generally been stable but stagnant, particularly as construction activity has picked up even if the non-residential sector remains slow. Bright spots include a strong automotive run rate, high industry truck sales and strong energy and shale plays that are spurring plate demand opportunities such as pipe production, petrochemical tank projects and infrastructure investments, Schmitt said.
"I think one of the weaker areas thats getting a lot of attention is the mining (capital expenditure) spending, which is expected to take a hit during the second half of the year," he said. "However, the mining aftermarket appears to be holding steady."
Last week, Peoria, Ill.-based mining and heavy equipment producer Caterpillar Inc. saw second-quarter net income plunge 43.5 percent on a tough mining environment (amm.com, July 24).
Plate prices took a dive in recent weeks after the last set of increases in the spring effectively fizzled out. SSAB Americas had previously joined other steelmakers in raising prices $30 per ton (amm.com, July 11).
"In the very near term, demand seems to be picking up a bit. Weve seen a decent order intake recently, and also renewed interest in some midsized to large projects," he said. "As published, we announced a price increase not long ago, and the increaseat this pointhas not slowed down our order intake. In general, the capacity utilization of the mills continues a slow rise, which is good news for the industry."
The company, a subsidiary of Swedens SSAB AB, saw its utilization rate climb just above 80 percent recently. It will be undergoing a planned outage at its Mobile, Ala., facility in August, Schmitt said, which was moved up from the fourth quarter. The first half of the outage would be scheduled for August, while the second half would be in the first quarter of 2014, he added.
"Were moving the outage up because certain things in the mill we want to get done immediately ... as were still in a bit of a summer vacation season, we want to nail that down in hopes of having our mills ready to run when we see that uptick," Schmitt said.
While SSAB Americas isnt planning any major investments or upgrades for the latter part of the year, Schmitt said the company is targeting several internal cost-reduction schemes at its mills and processing lines in the United States and Canada in an effort to remain competitive, although he declined to offer specifics.
The company is also focusing on making headway in high-strength steel, which accounted for some 40 percent of the parent companys global shipments in the second quarter. With its new quenching line in Mobile, along with production of quenched steels in Borlange, Sweden, the company aims to have high-strength steel account for 50 percent of its shipments by 2015.
Looking to the second half of the year, participants noted that 2013 has been different than 2012 because the second half of last year saw a "huge loss of momentum" due to greater imports and a loss of market confidence in the fourth quarter that continued into the first quarter of this year.
"Imports are always a concern. Imports had been lower in recent months accordingly with the lower demand in the U.S. market. But, depending on market conditions, the import share could be significant," he said. "So, its something we constantly keep an eye on and are quite vocal in the trading of fair imports."
Cut-to-length plate imports totaled 64,449 tonnes in June, according to preliminary U.S. Census Bureau data, down from 102,056 tonnes in June 2012.
Looking to Capitol Hill, Schmitt said more certainty needs to be established before material change can happen in the market.
"Before confidence is built in the market, and before service centers and customers are going to get back into the inventory game, theyre going to want to see some stability. And thats increasingly important in this fragile economy," he added.