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M. Murat Eryilmaz CEO, SteelOrbis

CEOLetter

MakingLists

egardless of your place on the steel supply chain, or how much or little steel you buy, sell, produce or process, everyone in the industry has a priority list of concerns ranging from “Doesn’t really matter” to “the sky will fall if I ignore this.” Topping the list for most, I’m sure, is prices. Will steel prices rise? Will they fall? How long will the trend last? What will the next quarter bring? Somewhere in the middle, there are customers and vendors, import sources and export opportunities, and all the minutiae of running a business. Near the bottom of the list (if it’s even on your list), there might be dirt. Yes, dirt. Specifically silt—the buildup of sand and debris at the bottom of harbors and rivers and other waterways vital to the transportation of goods. Certainly, most of you don’t spend even a second of your workday worrying about silt, but a few extra feet of it can have a rippling eﬀect on your business, no matter how it relates to steel. In this issue’s cover story (page 34), we explore just how a buildup of silt—and the frus-

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trating lack of funds to dredge it—is threatening the US’ transportation system with bottlenecks and limited opportunities. Even if you don’t buy imports directly, the availability (and resulting cost) of imported steel impacts domestic prices and availability. And while the answer to the problem rests in the hands of Congress, a little constituent pressure might go a long way to ensuring the free flow of steel to and from the US. Other concerns discussed in this issue include the role of commodity indices on steel spot prices (Steel Scope, page 18), fairness of environmental penalties on US mills (News Focus, page 26), and how steel service centers are faring in this extended economic recovery (Interview, page 20). How far up your own priority list these issues are placed is up to you. Certainly, seeking out unique market perspectives and networking opportunities are near the top, and one great, proven way is by attending sector-specific industry events such as our popular Rebar & Wire Rod Conference in January, coinciding with the World of

Concrete Expo in Las Vegas. Registration is already open and our speaker lineup is nearly complete—check out our website for up-todate information and rates. As our promotional materials for the RWR conference state, customers and vendors of the concrete reinforcement sector will be in attendance, as well as—most importantly—their competitors. And isn’t beating the competition at the top of everyone’s priority list, regardless of the industry? With kind regards,

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Contents

26 A slap on the wrist

Shallow waters, elusive funds

Striking a balance

14 24 Mexican auto sector drives

demand...and challenges The search for a CRU solution

Aceros Noticias / Mexican auto drives demand Demand for automotive steel is up, but competition is eroding service center margins

News Focus / A slap on the wrist Will AK Steel’s $3.5 million EPA fine work as a deterrent to future violations?

Steel Scope / e search for a CRU solution Is the blame placed on the CRU index misguided?

Cover Story / Shallow waters, elusive funds How can ports dredge for the future when federal money is used up elsewhere?

Interview / Striking a balance Bob Weidner of the MSCI discusses political and economic issues facing service centers

Editor’s Corner / A marriage made in… Clashing political parties need to foster prosperity, not discord

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Volume 6; Issue 4

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Pasha Stevedoring & Terminals (310) 835 – 9869 www.psterminals.com A wholly-owned subsidiary of The Pasha Group www.pashagroup.com

42 Interview / Playing it close to the vest SteelOrbis Brescia discusses the opportunities available for regional steel suppliers with Giuseppe Ferrero of Tuxor

46 Interview / Can slow and steady win the race? SteelOrbis Shanghai discusses market trends and the implications of emerging economic factors with Qian Yong of Shandong Shangang Group

54 Interview / Engineers without borders SteelOrbis Istanbul and Shanghai speak with Chen Guangwei of Shanghai JingXiang about his engineering company’s role in the Turkish steel market

Prime is published by SteelOrbis Elektronik Pazaryeri A.S. Mustafa E. Say Director Murat Eryilmaz

Editorial Director Burcak Odabasi

Editor-in-chief Katie Memmel

Marketing Brock Watson

Editors Julie Katsnelson, Margie Palmer, Baris Yarsel, Çağan Orhon, John Fitzgibbon, Luca Veronesi Editorial Headquarters United States 832 Camino Del Mar Ste 2 Del Mar, CA 92014

6 Steel News 8 Market Analysis 16 Bull & Gloom 24 Automotive Roundup 28 Light Gauge Stories 30 World Economic Report 40 Transportation Update 44 Trade Law Watch 48 WSD Strategic Insights 50 Supply Lines 52 Steel Marvels 56 Fabricator’s Corner 60 Crossword 63 Price Reports

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USA: +1 (713) 589-6049 Italy: +39 (030) 376-2340 China and Far East: + 86-21-5385 3535 Turkey: +90 216 468 10 50 E-mail: content@steelorbis.com Advertise: advertise@steelorbis.com Website: www.steelorbis.com e points of views expressed in the articles in Prime are those of the authors. Questions may be made by indicating sources. Prime is distributed to SteelOrbis subscribers free of charge.

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Volume 6; Issue 4

Steel News US producers file AD/CVD petitions against OCTG Following years of speculation, US Steel, Maverick Tube Corporation, Boomerang Tube, Energex Tube, Northwest Pipe Company, Tejas Tubular Products, TMK IPSCO, Vallourec Star L.P., and Welded Tube USA Inc. filed antidumping (AD) and countervailing duty (CVD) petitions against oil country tubular goods (OCTG) on July 2. e AD petitions were against OCTG from India, Korea, the Philippines, Saudi Arabia, Taiwan, ailand, Turkey, Ukraine, and Vietnam and the countervailing duty (CVD) petitions were filed against OCTG from India and Turkey. e scope of the case applies to OCTG, both welded and seamless, regardless of end finish (plain end, threaded, threaded and coupled), and whether or not conforming to API specifications. e scope of the investigation also covers OCTG coupling stock.

Workers at Lake Erie mill reject new contract proposal from US Steel On July 31, locked out union workers at US Steel’s Lake Erie Works in Ontario, a slab and hot-rolled coil mill, rejected the company’s new contract proposal, according to United Steelworkers Local 8782. Local 8782 president Bill Ferguson said 71 percent of the votes were against the proposed contract, and the union did not endorse US Steel’s proposal. US Steel locked out workers on April 28.

AK Steel asserts WTO ruling on MOFCOM falls short On August 1, AK Steel said that the Chinese Ministry of Commerce (MOFCOM) announced its implementation of the recommendations and rulings of the World Trade Organization (WTO) Dispute Settlement Body (DSB) regarding MOFCOM’s flawed investigation regarding imports of grain ori-

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EXTRA, EXTRA...

ented electrical steel (GOES) from the United States. While the determination reduces the duties on imports of GOES produced by AK Steel, it fails to comply with the WTO rulings and recommendations, according to the steelmaker. Under WTO rules, antidumping and countervailing duties can only be applied if the administering authority determines, based on positive evidence and an objective examination of the evidence, that the domestic industry is materially injured by reason of the dumped and subsidized imports.

Cliffs announces retirement of CEO and other executive changes Cliffs Natural Resources Inc. announced July 9 that Joseph Carrabba informed the Board of Directors of his plans to retire as the company’s president and chief executive officer by December 31, 2013. James Kirsch, who currently serves on Cliffs’ Board as lead director, was elected non-executive chairman of the Board, effectively immediately, replacing Carrabba as chairman. Carrabba will continue to serve as president and CEO and a director of the company until a successor has been elected, after which point he will also step down from the Board. Private equity firm recapitalizes United Pipe & Steel Corp. In mid-June, Morgenthaler Private Equity announced the recapitalization of Ipswich, Massachusetts-based United Pipe & Steel Corp., an independent master distributor of steel, copper and plastic pipe. UP&S founder and owner, David Cohen, will retain a substantial ownership interest. President and CEO Greg Leidner will continue to lead the company.

Volume 6; Issue 4

Colombia issues provisional AD duties against Chinese HDG On July 23, the Ministry of Commerce, Industry and Tourism of Colombia issued Resolution No.167, which imposes provisional anti-dumping duties on imports of galvanized steel sheets originating in China, while the administrative investigation continues. Preliminary results of the research carried out by agencies of the Ministry concluded that imports of galvanized sheet during the investigation period (March 19, 2012 through March 19, 2013) were conducted under unfair trade conditions, and have a causal relationship with the economic and financial damage registered in the corresponding national productive sector.

Former Steel Dynamics exec joins Carpenter Technology Wyomissing, Pennsylvania-based Carpenter Technology Corporation named Gary Heasley as the company’s new Senior Vice President - Performance Engineered Products (PEP), eﬀective July 22. Heasley has responsibility for Carpenter subsidiaries Amega West Services, LLC; Dynamet, Incorporated; and Carpenter Powder Products, Inc. He also oversees Carpenter’s distribution businesses, Latrobe Specialty Steel Distribution, Inc. and Specialty Steel Supply, Inc. e PEP portfolio accounts for approximately $600 million in annual sales, or 25 percent of Carpenter’s total annual revenue. Heasley joins Carpenter after eight years with Steel Dynamics, Inc. (SDI), for which he most recently served as Executive Vice President, Strategic Planning and Business Development, and President of Steel Dynamics’ subsidiary, New Millennium Buildings Systems. Mexico and China sign infrastructure cooperation agreement

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Conrad Winkler named new EVRAZ NA CEO upon Rehwinkel’s retirement On June 11, Mike Rehwinkel announced his retirement as President and CEO of EVRAZ North America, eﬀective July 1. Conrad Winkler, previously the company’s Executive Vice President - Long Products, assumed the role. Rehwinkel agreed to serve as Executive Chairman of the EVRAZ North America Board. In a press release, the company noted that Winkler joined EVRAZ in May 2011, growing the company’s rail business to the largest in North America and improving the rod and bar business substantially. In addition to initiating multi-million dollar upgrades to the Pueblo, Colorado, site over the last few years, he has expanded research and development for long products, and broadened the overall business product mix.

Timken Company evaluating separation of steel and bearings business In early June, e Timken Company announced that its Board of Directors formed a Strategy Committee to evaluate a potential separation of the company’s steel business from its other businesses and to review the company’s corporate governance and capital allocation strategy. e formation of the committee is in response to the non-binding shareholder proposal that was approved at the company’s 2013 Annual Meeting of Shareholders.

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US Steel elects Mario Longhi to president On May 30, US Steel Chairman and Chief Executive Officer John P. Surma announced that the company’s Board of Directors elected Mario Longhi to the position of president. Longhi retained his current role as chief operating officer and assumed additional responsibilities for Risk Management and Human Resources. e change took place June 1, and Longhi remains in Pittsburgh, Pennsylvania. Longhi joined US Steel in July 2012 as executive vice president and chief operating officer with responsibility for the company’s North American flat-rolled, tubular and Central European operations, as well as global operations services.

Bri-Chem Steel produces North America’s largest seamless steel pipe Bri-Chem Corp. announced in late June that Bri-Steel Manufacturing, the company’s ermal Pipe Expansion (TPE) division, produced 36-inch diameter seamless pipe. e pipe was the largest seamless steel pipe manufactured to date in North America. BriChem previously announced that it successfully produced 30-inch seamless pipe. In addition, Bri-Chem said that the 36inch pipe manufactured was of standard wall thickness, which is generally the most diﬃcult to produce utilizing the TPE manufacturing process. “As a result, we can now focus on producing heavier wall thickness 36-inch steel pipes and expand into 32 and 34 inch pipe diameters as well,” according to a company press release. Tenaris to supply heavy wall pipe for Gulf of Mexico project In late July, Tenaris announced that it is supplying oﬀshore line pipe for Exxon Mobil’s Julia Project, located 7,000 feet under the Gulf of Mexico. Products including 10.75-inch diameter X65QO pipes in wall thicknesses of 35 mm and 42 mm will be used for flowlines, risers, jumpers and flowline end terminations. “Tenaris is now working on heavy wall pipes from 1.378 in. (35 mm) up to 2.165 in. (55 mm), in almost all our projects,” said Philippe Darcis, Tenaris Line Pipe Product Engineering Manager. Volume 6; Issue 4

Isdemir workers go on strike Turkey’s largest steelmaker, Eregli Demir ve Celik Fabrikaları TAS (Erdemir), announced July 15 that its Iskenderun-based subsidiary, Iskenderun Demir ve Celik A.S. (Isdemir), and the Çelik-İş labor union failed to reach a consensus on a collective labor agreement, “as the union insisted on a 51 percent wage increase.” Accordingly, union workers went on strike as of July 15, in line with a previous announcement made by the union. e strike lasted until August 5 when Isdemir and the Turkish labor union Çelik-İş reached a settlement within the scope of collective labor agreement negotiations. e collective labor agreement aﬀected nearly 6,000 workers and caused a production stoppage.

Nucor: New OCTG trade case is “too little, too late” During Nucor Corporation’s Q2 earnings conference call on July 18, President and CEO John Ferriola addressed the state of trade laws, particularly as they relate to oil country tubular goods (OCTG). In his prepared remarks, Ferriola said that the recent filing against OCTG imports from nine countries was just another example of the US’ “too little, too late” approach in dealing with imports. e US has a reactionary policy, and instead needs a proactive policy to combat unfair trade. As for looming trade cases against other products, Ferriola said Nucor is looking carefully at every product being imported, and “there are many that belong in the same category (as OCTG).”

Esmark makes major executive changes In late August, Esmark Inc. announced that its Chairman and CEO, James P. Bouchard, will reassume CEO duties of Esmark Steel Group. Brian Bergmann, previously Vice President of Esmark Inc., was named Vice President and Chief Operating Oﬃcer for Esmark Steel Group. In addition, Daniel Martin was named Vice President of Finance for Steel Group operations. All management SO \ changes were eﬀective immediately.

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Steel News

Mexico and China signed a Memorandum of Understanding (MOU) in mid-June that aims to strengthen cooperation in infrastructure construction, according to the Secretary of Communications and Transport (SCT). In a statement, the Secretary explained that the MOU was carried out during the Chinese President’s visit to Mexico. “e purpose of the MOU is to know the infrastructure projects and its various facets,” said the statement. “Mechanisms established by this instrument will be through a process of exchange of information on technologies, experiences and legislation and will focus on exploring specific projects.”

MarketAnalysis

Will steel'straditional summer slow-down rouse into a livelyfall? RAWMATERIALS

US domestic scrap prices dragged down by supply overhang Overall expectations for July were positive after June scrap prices settled at sideways to slightly down, but expectations grew more pronounced as the month progressed that scrap prices in July would settle substantially above June levels. In the Midwest, mill buyers appeared to rush into the market to purchase scrap hastily before many took oﬀ for the long Independence Day holiday. Busheling scrap prices were the strongestfor a second consecutive month, and flat rolled mills entered the market prepared to pay higher prices—and with dealers bullish, prices settled up about $30/lt in Chicago to $410/lt, and up as much as $40/lt in Detroit. Shredded and HMS I prices rose about $15$20/lt throughout the Midwest, to $375/lt and $352/lt, respectively. On the East Coast, busheling scrap prices experienced a more moderate increase of $20/lt to $385/lt, while shredded scrap prices and HMS I prices rose about $18-$20/lt to $375/lt and $330/lt, respectively. However, as August approached, the US domestic market exhibited signs of softening:

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by August 1, some mills had already purchased shredded at prices that reflected a $10/mt decrease from early July prices. e two deals—Midwest and Ohio Valley—were concluded at $370/lt and $375/lt, respectively. Another mill buyer purchased a significant amount of shredded scrap at prices that were down $15/lt, but was turned down when going back later to purchase more scrap at down $20/lt from July levels. Even though mill demand for shredded scrap was decent, strong flows meant there was still too much availability throughout the Midwest and the East Coast and prices fell anywhere from $10-$20/lt in the beginning of the month. e other scrap grades, busheling and HMS I, fared better—busheling prices were unchanged in August and HMS I scrap prices generally only slipped by about $5$10/lt. ere was some anticipation that shredded scrap availability could lessen following the August buys if scrap flow slowed as a result of the price drop. Meanwhile, export scrap prices oﬀ the US East Coast to Turkey in mid- to late August continued their month-long trend of slow firming. Turkish mills showed a voracious appetite for scrap imports in the summer

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months, allowing prices to firm week-onweek. About 10 scrap cargos were sold to Turkey in the span of one week in the middle of August, at an average price level of about $380/mt for HMS I/II, $385/mt for shredded scrap and $390/mt for P&S scrap, compared to a mixed bulk cargo price of about $382/mt CFR Turkey in early August. Prices rose even more significantly when compared to late July transactions at $369/mt for HMS I/II scrap.

Turkey’s scrap appetite remains healthy despite Ramadan holiday In the latter half of July, expectations of scrap price increases after Ramadan began to emerge, following the uptrend observed in the previous weeks as Turkish steel mills focused their attention on export markets where offers gained acceptance. Reports of an ex-US HMS I/II 80:20 transaction at $370-$373/mt CFR was heard on July 23, while ex-US offers to Turkey for HMS I/II 80:20 hovered at $370-$375/mt CFR; exUS scrap transactions to Turkey just two weeks prior were at $366/mt CFR. In the meantime, ex-UK HMS I/II 80:20 offers to Turkey stood at $360-$365/mt CFR as of July 23. In the Black Sea market, ex-Romania A3 scrap offers to Turkey ranged from $350-$355/mt CFR and Russian offers to Turkey were at $360/mt CFR. Some ex-Romania A3 scrap transactions to Turkey were reported at $355/mt CFR. Scrap availability in Romania was reportedly tight, and thus scrap collection prices there reached $330/mt CFR, increasing scrap suppliers’ price idea for Turkey to the levels of $355$360/mt CFR. By July 30, import prices in the Turkish scrap market started to increase and the upward price movement was expected to continue. Turkish steelmakers accelerated their scrap purchases ahead of the Ramadan holiday amid expectations of improved buying activity in the local finished steel market.

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Chinese scrap traders grow increasingly confident In mid- to late July, steel scrap prices in most regions in China were on the rise, amid increased confidence among traders. At the same time, scrap prices in certain regions trended sideways. Jiangsu-based Chinese steelmaker Shagang Group made an obvious upward adjustment to its scrap purchase prices, while the purchase prices of some other buyers went up slightly. Meanwhile, the prices of ex-East Asia scrap remained rel-

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atively firm, which also helped to boost the confidence of traders. Overall, transaction activity in the domestic scrap market improved in the second half of July. During the last week of July, steel scrap prices in China continued to move upward. In the given period, many large domestic steel mills increased their purchases and offer prices for steel scrap materials, especially in eastern China. is helped to push up transaction prices for steel scrap in the local market. With increased tonnages being ordered, traders grew increasingly confident. In addition, as a result of the summer heat, scrap collection activity slowed, resulting in reduced availability of scrap materials. During the week ending August 6, steel scrap prices in China held stable, with slight fluctuations observed in central China. In the given period, a correction in steel prices and weakening iron ore prices diminished support for scrap prices in China. While purchase volumes from small steelmakers fell back, scrap demand from large domestic steelmakers continued to provide support for scrap prices. During the week ending August 20, steel scrap prices in some regions of China increased, while prices remained stable in other regions. ere were some upticks in steel scrap prices in China amid traders eager to push up their prices. But at the same time, scrap supply contracted. In the eastern region of China, some big steel producers hiked their purchase price offers in order to attract supplies. In addition, the rising trends of iron ore and semi-finished steel prices continued to provide support for steel scrap prices. Demand and prices for European pig iron strengthen As of mid-August, pig iron demand remained strong in Europe, contrary to expectations. Due to the summer holidays in the European markets, pig iron demand in August was expected to be weak. However, ahead of the final quarter of 2013, in which the steel markets were expected to be more robust, steel mills placed orders for autumn deliveries, so pig iron demand in Europe did not slow. Meanwhile, Ukrainian producers’ pig iron offers stood at $400/mt FOB as of August 15, while transactions between ItalVolume 6; Issue 4

ian buyers and CIS suppliers were concluded at $425-$435/mt CIF Italy. Italy was the most important buyer for Russian and Ukrainian pig iron suppliers at the time. In the January-April period this year, Italy accounted for 50.7 percent of Russia’s pig iron exports and 36.3 percent of Ukrainian pig iron exports.

LONGPRODUCTS

US rebar mills test out new pricing strategy during the summer While many in the US domestic rebar market looked forward to a predicted uptrend in scrap prices in July, their hopes for a bump in rebar transaction prices were foiled by a letter sent by mills early in the month announcing that rebar prices would remain unchanged through July, regardless of how scrap moved. Sources say the decision was based on weak demand—which was expected to only get worse as the annual summer slowdown took full effect—but some did not rule out the possibility that mills could change their mind. If the scrap increase was substantial enough, sources predicted that mills might feel compelled to push transaction prices up as well, whether or not the market was in a position to absorb it. But even if mills decided to forgo an official increase, many expected mills to at least be a little aggressive when trying to push spot prices above the mid-July range of $31.50$32.50 cwt. ($705-$717/mt or $630$650/nt) ex-mill in line with the $15-$25/lt (depending on region) increase in shredded scrap. en, not long after scrap prices settled, one mill sent a letter to customers announcing the raw material surcharge for rebar as such letters typically do—but there was something different: there was no mention of the change in RMS compared to the previous letter, or whether rebar base prices were changing or remaining the same. e letter did state that transaction prices would remain unchanged, but sources said there was a lot of “wiggle room” in the wording. Apparently, mills were trying out a new policy of detaching their price announcements from scrap trends to a degree. Releasing separate RMS and base pricing

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MarketAnalysis

Scrap suppliers reported that scrap demand in Turkey remained strong and that the latest ex-US HMS I/II 80:20 scrap deal was concluded at $375/mt CFR, while the latest exUK transaction for the same material took place at $370/mt CFR Turkey, reflecting a $3-$5/mt increase in price compared to previous levels. In the meantime, demand for ex-continental Europe scrap also remained positive, with a mixed cargo deal from the region for HMS I/II 70:30 and bonus grade scrap being concluded in Turkey at $365.50/mt CFR. After the Ramadan holiday (August 811), Turkish steelmakers returned to the market and maintained their firm stance on their finished steel export oﬀers. In September, the trends for the financial and steel markets were expected to become clearer. In the meantime, scrap purchasing prices influenced the trend of the local Turkish steel market as well. Before the holiday, scrap deals in Turkey were concluded at $378/mt CFR for ex-US HMS I/II 80:20 scrap, while an ex-Europe mixed scrap deal for HMS I/II 75:25, shredded scrap and HMS I scrap was transacted at an average level of $375/mt CFR. Finished steel demand was predicted to recover in the Turkish domestic market by September, and scrap market activity was likely to increase, while ex-US HMS I/II 80:20 scrap prices for Turkey were expected to reach $380/mt CFR. en, in mid-August, SteelOrbis heard from market insiders that a Turkish mill concluded an ex-UK scrap deal for 18,000 mt of HMS I/II 80:20 at $375/mt CFR and 18,000 mt of bonus grade scrap at $392/mt CFR for shipment in September.

MarketAnalysis announcements, as they had done for the previous two months, was just the first step. However, despite early optimism that US mills would be able to push up rebar spot prices despite keeping transaction prices oﬃcially neutral, the only movement that was seen for the remainder of July was a slight erosion of the lower end of the spot range, and only for larger customers. Although mills tried, they struggled to expand the higher end of the range, mostly because predictions for August scrap prices did not look too bright. As predictions for the US domestic scrap trend in August swerved from a sideways-todown trend to a slight uptrend in the last days of July, rumors that US rebar mills would respond with a price increase started gaining steam. However, earnest predictions for a scrap uptrend couldn’t compete against a severe overhang of shredded, and the meager $10-$15/lt price decrease in shredded scrap was not expected to have much of an impact on US domestic rebar prices. With supply tight and mills determined to not let spot prices sink, there was a strong chance transaction prices for rebar would remain unchanged in August, even when their new first-week-of-the-month deadline passed for a price announcement. However, sources pointed to rising import prices as a possible justification for mills to quietly firm up spot prices on a case-by-case basis instead of announcing anything oﬃcial.

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Nevertheless, by mid-August, sources reported that mills were “slammed” and out of many sizes until after Labor Day, indicating that they had no reason to drop rebar prices along with scrap. In fact, mills were reportedly using the demand bump to firm up the spot range; deals under or at the low-end of the $31.50-$32.50 cwt. ex-mill range started to evaporate. As of the third week of August, predictions for the September scrap trend did not yet point in any clear direction, but sources confirmed that mills would most likely use rebar demand as the determining factor in transaction prices instead of scrap. Other sources, however, believed the September scrap trend could still have an unoﬃcial eﬀect on rebar prices if the price change was significant enough in either direction. Most early predictions pointed to minimal change in scrap prices, if any, and if that turned out to be the case, rebar mills could still be able to ride the wave of decent demand to keep prices where they want them. But until then, spot prices for US domestic rebar remained stable, with most transactions taking place in the middle-to-high end.

Mexican rebar prices suffer in weak construction market In contrast to the Mexican domestic wire rod market, rebar prices did not respond immediately to the announcements regarding new rules for housing construction. e finances of housing construction companies Volume 6; Issue 4

were hit by delays in delivery of government subsidies and payment processes from mortgage agencies, as well as changes in administration and sector policies in Mexico. Also, the government wanted homebuilders to focus on urban development, increasing densification with apartment buildings and seeking to meet a growing consumer demand for living near work centers and schools. However, “demand for new homes has remained weak against other options, such as renting or buying existing homes, due in large part to a significant shift in consumer preference,” said an analysis by Standard and Poor’s. Although Mexican rebar prices saw a slight bump in mid-July to reach the level of $694/mt ex-mill, further attempts at price increases were met with substantial resistance. Some Mexican rebar mills attempted to raise prices by $14-$29/mt in early August, but by the middle of the month, domestic rebar prices actually fell by about $24/mt down to the level of $670mt/ex-mill. Despite the tepid demand environment, smaller private home builders began accelerating their production in order to capture a greater market share of the overall construction sector, while the publically-funded housing sector saw a reduction in volume of projects.

Turkish rebar market stagnates ahead of holiday In the beginning of August, local Turkish rebar spot prices increased on the back of the increased strength of the US dollar against the Turkish lira. Meanwhile, traders reportedly purchased material for their inventories ahead of the Ramadan holiday. Local mill Kardemir received demand for a total of 28,750 mt of rebar on August 1 within the scope of its rebar sales which opened on July 10 at TRY 1,170/mt ($511/mt) ex-works, excluding VAT. Also, another Turkey-based producer, Icdas, announced new prices at higher levels at the start of August, resulting in increased demand for rebar at Kardemir. Market players said that, as the Ramadan holiday approached, demand from end-users decreased, and demand would improve following the holiday. Due to the approach of the Ramadan hol-

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Volume 6; Issue 4

ward trend—on August 19, rebar futures contract (1401) oﬀers closed at RMB 3,812/mt ($623/mt) on the Shanghai Futures Exchange, up $11/mt compared to the previous week. Chinese domestic wire rod and rebar prices rose for a number of reasons. First, due to rising iron ore prices, traders were optimistic about future prospects for the market and therefore increased their oﬀer prices for rebar and wire rod. Secondly, prices in the domestic steel futures market showed significant upward movement, thereby also providing support for the domestic spot market for rebar and wire rod. Nevertheless, transaction volumes stalled following the price increases.

FLATROLLED

US domestic flats market strengthens throughout summer Following the third round of price increase announcements since late May, US domestic hot rolled coil (HRC) and cold rolled coil (CRC) spot prices were on the rise in early July, getting increasingly closer to official mill asking prices. Hot rolled coil (HRC) and cold rolled coil (CRC) spot prices were $30.00-$32.00 cwt. ($661$705/mt or $600-$640/nt) and $35.00$37.00 cwt. ($772-$816/mt or $700-$740/nt), respectively, both ex-Midwest mill, at the start of the month. Activity levels were stable and demand was strong, allowing mills to continue to push for higher prices. Additionally, busheling scrap prices for July settled $30-$40/lt higher in the Midwest compared to June levels. In late July, domestic mills rolled out a fourth round of price increases for about $1.00-$1.25 cwt. ($22-$28/mt or $20$25/nt) and the kind of immediate support that followed the first three announcements was not evident. Lead times were four to five weeks on HRC and about six weeks for CRC, but most buyers were still unwilling to make major buys, only making purchases to fill inventory holes. Nevertheless, mills did not make major deals, even for larger orders, and the bulk of HRC spot market activity took place at about $32.00 cwt. ($705-$719/mt or $640$650/nt) ex-Midwest mill by early to mid-

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MarketAnalysis

iday, activity in the local Turkish rebar marIn the Middle East, according to market ket stagnated, with demand remaining mod- sources, rebar prices in the local UAE market erate. As of August 5, traders’ rebar offers in declined amid low demand and slower buythe Turkish domestic market were in being activity, as well as the Ramadan holiday. tween $599-$619/mt ex-warehouse and on Accordingly, rebar prices in the UAE domesan actual weight basis. e TRY prices in- tic market declined by AED 10/mt ($3/mt) clude 18 percent VAT, while the $ prices ex- in the final week of July to AED 2,330/mt clude VAT ($1 = TRY 1.93). ($635/mt) delivered, although even lower ofAs the middle of the month approached, fers were available in the market. Meanwhile, market sources reported that ex-Turkey rebar as a result of market conditions, local steeloffers remained stable week-over-week at $595$605/mt FOB. Meanwhile, strong activity was not expected until the end of August in the Middle East and North Africa (MENA) region—one of Turkey’s most important export destinations— amid the wait-and-see stance of buyers in the region due to their sufficient inventories. Rebar demand was slated to improve by September in foreign markets. Turkish UAE rebar prices declined in August amid low mills waited for Septemdemand and slower buying activity. ber to revise their export prices and were expected to keep prices stable maker Emirates Steel Industries (ESI) kept through the remainder of August. its rebar prices for August production unOn August 19,Turkish producer Icdas’ changed as compared to prices for July out12-32 mm rebar prices in Turkey’s Marmara put materials, with prices remaining at AED region were at TRY 1,186/mt ($608/mt) + 2,310/mt ($629/mt) ex-works. Demand was VAT ex-works, while its rebar prices in Biga, anticipated to recover following Ramadan Canakkale in northwestern Turkey were TRY and as a result of new construction projects. 1,174/mt ($602/mt) + VAT ex-works. e mill’s new list prices rose TRY 15/mt ($8/mt) Chinese rebar prices on the rise in August as compared to the price list issued on AuIn early August, domestic Chinese rebar gust 1. and wire rod prices only fluctuated slightly, On the import side, where demand was with minor increases and decreases seen on stable, two Turkish mills concluded rebar a week-on-week basis depending on region. deals to the UAE at $590-$595/mt CFR on On August 5, rebar futures contract (1401) a theoretical weight basis and completed offers closed at RMB 3,685/mt ($596/mt) at their sales for late August shipments by late Shanghai Futures Exchange, rising by July. In addition, market players indicated $7.50/mt compared to the previous week. that it was early to conclude transactions for Due to low transaction volumes, domestic September deliveries and new purchases prices of rebar and wire rod started showing would likely restart in the middle of August. signs of weakness. Still, some of the major Meanwhile, ex-Turkey rebar offers to the Chinese steel mills continued to raise their UAE for September shipments were antici- prices. pated to move up to $595-$600/mt CFR on By mid-month, the Chinese domestic a theoretical weight basis. rebar and wire rod market maintained its up-

MarketAnalysis

of new assembly plants in Mexico, there needed to be better integration of Mexican suppliers, because if there are not more Mexican entrepreneur manufacturers, the country will be exporting cheap labor. However, Mexican CRC’s long uptrend came to a halt in late August, as prices fell a mere $2/mt down to $829/mt ex-mill. According to sources, a decrease in consumer spending in Mexico and declining demand for cars in certain export regions was expected to result in a drop in automotive production in Mexico, and already the eﬀect was apparent on some flat rolled steel prices. Mexican HRC prices, meanwhile, still held their uptrend and increased $4/mt in late August to reach $745/mt ex-mill.

August. Spot prices were still about $0.50$1.00 cwt. ($11-$22/mt or $10-$20/nt) shy of oﬃcial mill prices, but mills appeared content to continue taking orders at $32.00 cwt. But summer stability made some nervous, rather than enticing customers to stock up on material. While mills had no trouble filling August and September order books with higher-priced coil, October order books were a concern given traditional end-of-theyear uncertainty, an anticipated increase in import arrivals in the fall—albeit small—and buyers’ ongoing preference to keep inventories lean. Still, August was a steady month for service centers, as well as mills. e fourth round of price increases did not fully stick, particularly on larger orders, but it did bump prices up and helped to keep the market firm. HRC spot prices were up to $32.50$33.50 cwt. ($716-$739/mt or $650$670/nt) ex-Midwest mill by late August, while CRC prices had risen to $37.00$38.00 cwt. ($816-$838/mt or $740$760/nt) ex-Midwest mill. Mexican flat prices see overall strength from automotive Prices for domestic Mexican cold rolled coil (CRC) recovered $8/mt in early July to reach the level of $772/mt ex-mill, amid increased demand coming from a boost in investments in the automotive sector, especially in the industrial region of the Bajio; however,

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there was still the challenge of strengthening national supply. Meanwhile, Mexican hot rolled coil (HRC) prices fell $5/mt in the same period, settling at $714/mt ex-mill. Sources told SteelOrbis that the decrease occurred despite steel producers and legislators agreeing to establish a common front against import products involved with subsidies, dumping practices, and artificially cheap prices in the Mexican market. By mid-July, Mexican CRC prices saw an even bigger jump, increasing $45/mt to the level of $821/mt ex-mill—sources attributed the strong uptrend to automotive investments in Mexico that strengthened demand for flat products. HRC prices also felt the automotive bump, increasing $19/mt to settle at $733/mt ex-mill. Mexico currently produces 2.5 million units annually in the automotive industry, and it is likely that the sector will close 2013 with 2.8 million units produced. By 2016, the sector is expected to produce 4.1 million units annually, and thus employment rates are slated to surge, in both auto and auto parts manufacturers. In the beginning of August, Mexican CRC prices continued their uptrend, although not as strongly with a $10/mt increase to the level of $831/mt ex-mill. HRC prices also continued to move upward, gaining $8/mt to settle at $741/mt ex-mill. However, sources told SteelOrbis that while demand for HRC had grown with the advent Volume 6; Issue 4

Positive signals keep Italian flat steel prices stable During the latter half of July, Italian domestic flat steel prices had been holding steady. Local operators, particularly service centers, said activity levels were satisfactory at the time, in part due to stock replenishment, but also as a result of positive signals recorded in some end sectors. Domestic service centers bought material for September and even for October in some cases, while still aiming to keep their stocks at relatively low levels. Domestic steelmakers were unwilling to lower their prices, either, and prices held at €430/mt ($570/mt) for hot rolled coil (HRC), €500/mt ($663/mt) for cold rolled coils (CRC) and €480/mt ($637/mt) for hot-dip galvanized (HDG) coil, all ex-works.

Chinese HRC prices begin to move higher in late summer In the final week of July, the previous uptrend in the Chinese domestic cold rolled coil (CRC) market slowed, and prices held steady. Amid the low number of construction starts during the summer, market activity declined slightly at the time. Additionally, with CRC prices ticking downward, traders of CRC products were more cautious—toward the end of July, traders faced financial pressures and accelerated destocking by lowering oﬀers. By early August, hot rolled coil (HRC) prices in the Chinese domestic market weakened slightly.

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Turkish flat steel market outlook improves after Ramadan In the Turkish domestic flat rolled steel spot market in early August, demand was weak but prices remained unchanged on a week-to-week basis. e lull in the market ahead of Ramadan continued following the holiday, as strikes had come to an end just before start of the holiday. As market players slowly returned to business-as-usual activity, demand was poor and deals continued to take place at pre-holiday price levels. Meanwhile, prices were expected to trend sideways for some time following the end of the strikes, although there was a

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MarketAnalysis

As new supplies arrived in the market, traders who had not been inclined to sell oﬀ stock materials previously were more eager to pursue orders, with the aim of bringing in cash. Meanwhile, some traders even reduced their actual transaction prices below mainstream market prices in order to reduce inventory levels. Given the low consumption of HRC products, it was increasingly harder for traders to liquidate their stock materials, so further price cuts were not out of the question. Nonetheless, in early August, hot rolled coil (HRC) prices in the Chinese domestic market improved moderately on account of higher iron ore prices. In addition, previous inventory destocking contributed to the upward movement of domestic HRC prices. e uptrend in the steel futures market also helped to boost market confidence, while demand held steady. By the latter half of the month, HRC prices in the domestic market were still on an upward trend. Major Chinese steelmakers Hebei Iron and Steel Group and WISCO increased their HRC oﬀer prices by RMB 150/mt and RMB 130/mt, respectively, for September delivery, providing support for market prices. Market prices for HRC products slowly moved up, supported by decent domestic transaction activity and traders that were optimistic about the market’s future. In addition, weather conditions improved, so demand for HRC was poised to increase in the near future as well. Nevertheless, following an uptrend iron ore prices reversed somewhat and HRC availability was decent.

chance that local flat steel prices would gradually increase due to tighter supply as a result of the strikes, in addition to an anticipated demand recovery. Meanwhile, ex-Turkey flat steel export offers in mid-August were considered to be high for foreign buyers, and demand in the flat steel export markets in Turkey remained poor. Apart from the political turbulence in the Middle East and the summer holiday in Europe, ex-Turkey flat steel offers were considered to be too high by foreign buyers, which in turn negatively impacted demand. Meanwhile, Turkish mills gained some relief in their domestic market as local price levels were more advantageous as buyers began steadily making buys following the availability shortage caused by the strikes. Turkish mills’ export offers for hot rolled coil (HRC) were at $580-$600/mt FOB, while their offers for cold rolled coil (CRC) were around $690-$710/mt FOB. However, since foreign buyers requested discounts of $30-$40/mt on the list prices, Turkish mill were uninterested in the offers. Toward the end of August, the Turkish hot rolled coil (HRC) spot market exhibited with moderate demand. Following the sudden price hikes caused by strikes at certain domestic mills, HRC spot prices were revised downward by $5-$10/mt as compared to the previous week, although most still remained positive on the market’s prospects. e fact that price declines were minimal was seen as a positive development for Turkey’s HRC market, and demand expectations for the fall improved. On the other hand, import plate demand in Turkey in mid-August was weak, with no signs of improvement on the horizon. Steel plate offers to Turkey from Ukraine-based producers Alchevsk Iron and Steel Works and Ilyich Iron & Steel Works stood at $550/mt CFR for October shipments, indicating an increase of $10/mt compared to late July/early August offers. In addition, Macedonia-based Makstil’s steel plate offers to Turkey were $740/mt CFR for shipments in September as of August 15, up $20/mt as compared to the previous month amid the general uptrend seen in flat steel prices. SO \ Volume 6; Issue 4

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AcerosNoticias

Mexicanautosector drives demandandchallenges

espite the expected growth in Mexico’s steel demand with the increased production of cars and automotive parts, steel service centers estimate that margins will continue to decline due to increased competition. By 2017, experts predict that new vehicle production in Mexico will reach approximately 4 million units compared to 2.9 million units produced in 2012, subsequently raising steel demand levels to 2.6 million tons, an increase of about 40 percent from current levels. Such expectations have led to a surge in new service centers in the country; in the beginning of 2013 there were approximately 25-30 large service centers in Mexico, and by summer there were 10-12 more— built mostly by foreign firms. However, most new steel service centers only operate between 55-65 percent of their capacity due to the large number of competitors.

Friendly competition with mills Mexican steel distribution companies invested about US$1.5 billion in 2012, mainly in service centers to serve the automotive sector. And this year, investment estimates are higher, according to Raymundo Diaz Oñate, president of the National Confederation of Steel Distributors (CONADIAC). CONADIAC distributes between 36-40 percent of the total steel produced in Mexico. In 2012, the association reported 35,500 direct jobs serving the areas of construction, automotive, appliances, and metalworking. e automotive sector is now the main driver of steel demand in Mexico, but demand is also being generated on a regional basis. For example, the Bajio region is consuming significant amounts of steel for the construction of industrial buildings, warehouses, housing, and infrastructure to serve all the new automotive-related businesses being installed in the area.

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According to CONADIAC, AHMSA’s Phoenix Project and Ternium’s Pesquería are not boons to distributors because they are producing products to replace automotive sector-related imports, but that not is the case of Deacero, whose expansion of its Ramos Arizpe, Coahuila plant is intended to

response times, and we have the inventory available at the time that the client requires and have greater variety of products.” One of the greatest challenges faced by steel distributors in Mexico during the second half of 2013 is to reverse the low utilization of installed capacity, which is now

serve the domestic market. Steel producers are under pressure from rising iron ore prices, but the national market as a whole will not accept all the increases mills try to push through. Prices for some steel products have slightly increased recently, but prices for others have declined. Longtime distributors have historically had jurisdiction over the mills, but some of them are starting to have a stronger presence to the end consumer. For certain segments and certain volumes, mills are required to sell directly, but there are extra costs and expenses such as keeping warehouse inventory. “Mills have certain advantages and distributors have others, so we each have to search for our own niche market,” said Diaz Oñate. “e role of the distributor and service center is closer to the clients, a greater closeness with their needs, delivery times and

between 50-60 percent, a serious hit to margins. Further, some dealers did not cover fixed costs and balance their first half outlook, indicating a coming “dark” period in which sales volumes will fall between 3-7 percent, depending on the sector, compared to the first half of last year. A contributing factor to this issue has been the global oversupply of steel, comprising many millions of tons that are superfluous in the world. For plants that produce certain products to be imported, there is a need to look for that balance between supply and demand. But it is important and necessary to take comprehensive measures to consider interim and final producers that maintain the production and supply of the domestic market, while combatting unfair trade practices to avoid damage to the industry, said Díaz Oñate.

Volume 6; Issue 4

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All growth is good but we need to evaluate how to grow as service centers. -Arturo Marroquin the traditional centers in Mexico are taking greater interest in the automotive and industrial markets, so they are investing to add capacity. He added that the service centers in Mexico have many advantages for knowing the market, in addition to having access to competitive costs: “At the end, we will see who gives the best service.”

Grupo Villacero, a global star rough strategic alliances it made in 2012, Mexico’s Grupo Villacero grew 57 percent that year and ranked sixth in CNN’s Expansion of Global Companies list. According to research by CNN Expansion, the company—headed by Julio César Villarreal—managed to increase sales 57.5 percent from 2011. In contrast, during the same year, steel production in Mexico fell drastically in February and prices slipped by about 30 percent, according to the National Chamber of the Iron and Steel Industry (CANACERO).

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Villacero was able to adapt to the environment through investment partnerships and purchases, which strengthened the company as a leader in marketing logistics transformation and steel products. “In 2011 and 2012 we made several acquisitions. at sparked the growth that we had which was reflected last year,” says the director of Institutional Relations of Villacero, Ignacio Treviño. is year, the company employs more than 6,000 people in the country and abroad and participates in various market segments such as distribution, construction, housing development, government general industry and international trade. e company also provides financing services to customers through Afirme Grupo Financiero and has strategic alliances that allow them to have distribution centers and oﬃces in more than 30 countries. Last June, Villacero was recognized by America Economía as the second global company in Latin America overall. While steel distributors’ situation in Mexico and the world is full of obstacles, Villacero remains financially healthy and maintains a sharp business focus—even above big players like SteelCorp or Stemcor who face serious financial problems. SO \

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AcerosNoticias

Consolidating the chain Service centers and distributors expect further consolidation in the sector to reach optimum levels in terms of capacity utilization, said Arturo Marroquin, CEO of Acero Prime. “All growth is good but we need to evaluate how to grow as service centers,” he said, adding that it will be a major challenge to compete with service, quality and delivery times. He stressed that the company is expanding the capacity of its operations to cover different ranges of service, adding flexibility and reducing response times. Acero Prime has a plant in San Luis Potosi, another plant in Ramos Arizpe, and a distribution center in Toluca. In 2012, the company sold close to 540,000 tons, of which 85 percent were in the automotive industry, 10 percent in appliances and 5 percent in other industries. In the automotive sector, Acero Prime works mostly with imported steel; however, with the opening of AHMSA and Ternium’s new projects, domestic steel consumption is set to increase. For his part, Bernardo Vogel, CEO of Grupo Collado, said Mexico is viewed with great optimism and there is a strong push from Asian-based service center firms coming into the country. In addition, many of

Bull&Gloom

Mr. Bull: Hello, Mr. Gloom—you must have had a jolly good time lately as our economy seems to be starting, and sputtering, and starting again. Admittedly, we have not had the clearly defined breakthrough that we normally get after a recession, but a breakthrough is indeed in the making even though it is painfully slow. ere are many caveats as far as progress is concerned, but I wanted to add a particular concern of mine. It is called infrastructure. America, the “New World” where everything is bigger and brighter, is slowly losing its erstwhile leading role in the development of its infrastructure. Yes, successive administrations in Washington have paid lip service to this problem and the current government even explicitly named infrastructure in its economic stimulus package

Mr. Bull: Our country’s infrastructure is crumbling and it is beginning to aﬀect our economic output rather drastically. way back in 2009. As with so many things in Washington, many badly-needed projects haven’t made it past the drawing board. Our country’s infrastructure is crumbling and it is beginning to aﬀect our economic output rather drastically. Our vital waterways, including the mighty Mississippi, is choked with barges that have to move at a snail’s pace because a lack of funds has stopped any kind of lock improvements and dredging. Every year about 500 million tons of cargo is transported on our water system and the main artery is getting clogged. Will a total collapse follow or will we finally be able to invest the necessary funds? Mr. Gloom: Hello to you, too, Mr. Sunshine—although you do sound a bit cloudy today! Welcome to the dark side! You are absolutely right, though. Our transportation infrastructure—for all modes—is indeed in bad shape. You correctly highlight the problems with the river system: the locks and dredging are way behind in their upgrading.

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e good news is that because of the economy, about 30-plus percent of barges are tied oﬀ right now due to lack of cargo. Yep, over 30 percent. Great time to ship by barge with the ensuing low rates, and that means that we have the room to make the improvements with minimal disruption. But it gets worse—have you tried to ship by rail lately? ese guys often have pointto-point monopolies and act like it. And due to the nature of the beast, you only get attention and good rates if you want to ship unit trains. I don’t blame them for that, but rail is not a viable mode of traﬃc for most unless coal and grain are soft. To be sure, they need some easements in order set up competing rail lines alongside existing ones. I’m sure you’re laughing at that possibility while reading that—I am, too. And the highways? Don’t get me started. at seems to be the first thing cut in municipal budgets in the recession and beyond. When I think of all this, I need an aspirin. en I think of the guys running the show in D.C. and I think I should take some hemlock instead.

Mr. Bull: Well, you are somewhat wrong about the steel market. It is decidedly not setting the world on fire, but it is not that bad either. Come on—we’ve had a number of steel price increases and not all of them can be explained just by raw material increases. Part of it was inventory replenishment. And why, pray tell, do inventories need to be replenished? Because steel is in demand again. More so than we realize. And how much more could be sold if our dysfunctional legislature could agree on passing bills with meat that actually help our country? No pork, please, just sound investments in worthwhile projects such as our infrastructure. You are absolutely right (I can’t believe I am saying that) about the rail business. It is too expensive and too ineﬃcient. Still, most of the cargo in the US is being moved on the water and we do need investments in that sector. e more I look into it the scarier it gets. e American river system has about 250 locks, of which slightly more than half were built in the 1950s and 1960s. Life exVolume 6; Issue 4

pectancy for the average lock is assumed to be 50 years. e clock is ticking and in far too many cases has stopped. We need to invest more! e Fed did a very good job of sorts printing all that money, but it has not trickled down to the much-needed common needs. e banks are soaking up most of the liquidity to invest back into the stock market—we could be so much farther along in our recovery if we would be more prudent about investments. Unfortunately, our current system does not lend itself to such logic. As for steel, we enjoyed a bit of a spike in prices due to production problems. It can’t last long, though, because there is no real demand increase. But I am sure you have a script all ready to tell me how wrong I am.

Mr. Gloom: Sigh—the increase in steel prices has nothing to do with raw material prices. Period. Obsolete scrap was up maybe $20/lt in July, on average. at is nothing and does not account for the $100/nt increase in steel prices during the summer. e alloys are almost all down. e notion of raw material prices being up is pure rationalization on the producers’ part and fear on the consumers’ part. e reason is that small production disruptions, taking 400,000 tons out of a 100 million ton market, were enough for a starved industry to raise prices. ey could get the increases to some degree, because consumers refuse to carry inventory in the face of governmental policies. Make no mistake—the imports are coming and production will be back, but the economies will take a little longer. In this day and age, we are in a massive overcapacity situation, even if we had good economies. Everyone is waiting for China to cut back their 770 million ton industry (75 percent of the world demand), but don’t hold your breath! You will soon see anti-dumping suits and, as I have said before, walled-oﬀ regional trading blocs. In the interest of the amiability you always display, you are right about the banks and the printed money. Finally you see it my way! e US stock and housing markets are where the banks have shoveled it and are bubbles waiting to burst once the first of the

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Mr. Gloom: Real unemployment is up to 14.2 percent...I would hate to see how bad we’d be doing if we weren’t doing so well. Regarding logistics, you are right to be nervous about the US river system. But, I have some good news (horrors!) and some bad news (obviously). e bad news is that there are still hundreds of ocean-going vessels tied up in Southeast Asia. River traﬃc is down about 30 percent. But these are the result of the continued RECESSION, Mr. Bull. e good news, though, is that shipping rates are low. Also good news: the WRDA bill contains provisions to remove some lock projects from the Inland Waterways Trust Fund (IWTF). is action will free up around $750 million to the IWTF to complete critical priority navigation projects. Also included in the bill is prioritization of navigation projects. Prioritization is based upon risk of failure and benefits to the nation with an emphasis on finishing projects already underway and ensuring that funding is available to eﬃciently complete work. As gloomy as I like to be, this is a good step. Mr. Bull: Ah, Mr. Gloom, when you are at your condescending best, you make my point for me. So the recent steel price increases have nothing to do with the upticks on the raw material side? So why then do the mills in the US feel encouraged to raise

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prices by no small extent? Put your ultraconservative thinking cap on and it will come to you: demand is up. As I said before, it may not set the world on fire, but demand for steel is up—at least in the US and despite the well-known global overcapacity in the steel sector. It will only get stronger as the US recovery gets stronger. By the way, you must not have received the memo: the US Federal Reserve has announced that they will stop their quantitative easing program (printing money) because they think the economy can stand on its own feet. So please don’t despair too much that we will all suﬀer from hyperinflation because of the recent QE action. It is not going to happen. e creaking maritime infrastructure, however, could be damaging and truly holding back our economic development. In about two years the widening project of the Panama Canal should be completed. Ships passing through will be longer, wider and have more of a draft than they have now. Exports point to the fact that only a handful of American ports will be able to handle this new class of mega carriers. ese are things that are worrisome and keep people in the know awake at night.

at is a drop of over 2 percent since “the recession has ended.” Boy! I would hate to see how bad we’d be doing if we weren’t doing so well.

Mr. Bull: How encouraging to see that you have left the realm of darkness long enough to agree with some government spending action. Action is needed, though. e river system and the Mississippi in particular are the jugular of the US transportation system and we cannot aﬀord to lose it. A final number: in a recent infrastructure ranking conducted by the World Economic Forum the US came in at number 25. at’s right—25, behind countries such as Barbados and South Korea. Your recession clock ticks tocks in your house only. Last I checked, we are still growing and inflation is not rampant even though your economic theories of yesteryear expect it to be. Private final domestic demand is expected to grow 3.4 percent in 2013 and 3.8 percent in 2018. It is driven—hello, old friends!—by automotive sales and homebuilding as well as job and income growth. Looks like it’s time to get a new clock. SO\

Mr. Gloom: Psst, Mr. Bull…I sell some of those raw materials. Prices are down. e industry propaganda that they are up is just another reason why this spike won’t last. And the Fed has only floated the idea that they will ease QE, precisely to see the market reaction…which is always bad simply because the pumping of money goes to housing and stocks. But don’t worry—they won’t stop. ey can’t without the markets crashing. Do you know that of the 700,000-plus jobs supposedly created since the “end of the recession” over 550,000 are part time? is is according to the US Government’s own Household Survey. No surprise with Obamacare and its penalties. Talk about unintended (but entirely foreseeable by sane people) consequences! at is something a one-year delay won’t cure. When considering those who have quit looking for employment, we see that real unemployment is also up, over 14.2 percent (an increase from 13.8 percent in June) and the “civilian workforceparticipation rate” is down to 63.5 percent. Volume 6; Issue 4

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Bull&Gloom

liquidity dominoes in Europe starts to teeter. Wait for it. Portugal, Cypress and Greece are…you guessed it—even worse now! Like the US, the E.E.U. promised forever cheap money. Way to go, guys! Merkel, ever the politician, caved in order to get re-elected. She sure didn’t want a crisis going on this September. Maybe we’ll see something better from her afterward. In the meantime, the problems and fundamentals for the QE and all the printing, after a run up in stocks, get worse each time they do it. Are they blind? It is criminal, I tell you.

SteelScope

The search for a CRUsolution

new year often brings renewed optimism, excitement for what’s to come and a fresh start with higher prices for those in the steel industry. Customers are more willing to make stock buys, not worried about inventory overhang at year’s end. But the start of 2013 was diﬀerent. Over the first few months, the market wasn’t showing signs of the kind of recovery that many had anticipated. Early attempts to bump up flat rolled spot prices were short-lived or entirely unsuccessful, and prices fell rapidly. Rumblings that the flat market’s inability to absorb higher prices despite decent demand surfaced in early January, and by late March, service center buyers contended that deals made under the CRU index moved tons out of the spot market, and when combined with lagging demand and low service center shipments and inventories—many service centers had been living oﬀ low inventories, only placing orders when immediately necessary—contributed to pushing spot prices lower. e CRU numbers are an assessment of the market for various products, the most prominent of which being hot rolled sheet. e CRU aims to follow the market and provide price transparency for those buying, selling and trading steel. e CRU tracks spot prices by polling suppliers and the prices at which they sold steel on the spot market and customers, and at what prices they purchased steel on the spot market. Volume submitted to CRU is equally split with 50.6 percent coming from major mills while 49.4 percent comes from mill-direct buyers who are active in the spot market. Further, the CRU index is created by removing any outliers (significantly high or low numbers, as a spot price can vary based on order size, relationship with a mill, etc.) to create a weekly price assessment that is the clearing index used to settle futures on the Chicago Mercantile Exchange (CME). e CRU is responsible for the settlement of over $20 billion worth of contracts, including steel futures, so its accu-

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racy is essential. e majority of service center business is under some sort of contract umbrella based on the CRU spot market index. e most popular is a year-long monthly contract, referred to as CRU-minus, whereby a buyer and mill agree to a specific amount of volume every month, priced at a discount to the CRU spot price index for the prior month. With buyers always looking for the best possible deal, and mills hungry to fill order books, mills allowed their customers to tuck extra spot tons under their existing contract tonnage, known as a bucket deal, to secure a more competitive price, a “CRU-minus something” price. e bucket deals allow service centers to flex their tonnage up or down, based on the direction of prices. Sources told SteelOrbis that a CRU minus 5 percent price was extremely common, and the number of these deals seemed to grow almost exponentially within just the first few months of the year. It appeared that the “CRU-minus” deals essentially replaced the spot market: why pay the higher spot price when CRU-minus deals were so accessible, and significantly less expensive? It all came to a head in April when mills publicly told customers that they’d had enough of the CRU-minus deals, and, essentially, losing money. But these deals were nothing new to the flat rolled market. Josh Spoores, the Principal Consultant – Steel for the CRU, explained that these types of deals have grown in prevalence the last couple years. As sheet steel capacity domestically (i.e. the ramp up at yssenKrupp Alabama, and upgrades at Severstal NA) rose, competition increased, and mills looked to secure monthly tonnage commitments from typical spot market buyers. In order to secure the tonnage, mills began to oﬀer larger and larger discounts. Securing tonnage at competitive prices is one thing, but selling material at a loss is another, so in late April mills separately, but collectively took a stance against the deals Volume 6; Issue 4

that they themselves had been making. A number of US domestic flat rolled mills informed customers of their intention to no longer sell at price discounts to the CRU. Led by ArcelorMittal USA, Nucor Sheet Mill Group and Severstal NA sent letters to customers indicating that the market deals at prices that were at a discount to the published CRU index would be coming to an end due to the detrimental eﬀect on domestic prices over the previous months. ArcelorMittal USA said specifically: “We believe this pricing mechanism has become more prevalent and is causing an unnatural ceiling price and therefore is undermining our ability to collect a fair market value for our products. For the balance of 2013, we will oﬀer firm price agreements for monthly, quarterly, and six month durations that assume volume and price is sustainable for all parties. We will consider competitive situations on a case by case basis for longer term agreements, but it is not our intention to enter into agreements based on a discounted level to the CRU. If a reference to the CRU index is required, we will use CRU as a minimum price only.” e immediate impact of the announcements was negligible—walking away from contracts, particularly annual contracts, is not an easy feat, and would clearly anger customers, so it was evident that there was no swift solution to a problem that had been building for years. Mills kept their annual CRU-minus contracts, but said that they would not enter new ones. Immediately following these mill letters, media reports abounded about mills’ discontent with the CRU, and many began to question whether the CRU index was as neutral and accurate as it claimed, asserting that the prices on the index were distorted. Some spoke out against the accuracy of the CRU index, claiming that CRU-minus deals, which were well below spot market prices at a given time, were reported as a spot price transaction to the index, thereby alter-

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SteelScope

ing prices on the index. However, Spoores countered that “with typical ‘CRU-minus’ discounts of 5 percent or more, any submission that is $30/nt ($1.50 cwt. or $33/mt) or more below the prior week or prior monthly price is quickly questioned and subject to further verification.” But while some voiced uncertainty as to whether prices published on the index were distorted, Spoores and Glenn Cooney, the Head of Indices for the CRU, stressed that this distrust was misguided. First and foremost, Cooney explained that as the index that is used to settle millions of dollars’ worth of futures on the CME, the CRU has checks in place to ensure that prices being reported are indeed only spot numbers, such as running prices provided in a given week to prices provided in the prior month. e CRU is also subject to a third-party audit of the data it is provided, the first commodity price index to do so. Additionally, Spoores and Cooney contest that much of the media misinterpreted what mills announced, and there is a clear distinction between eliminating CRU discounting and abolishing the use of the CRU index altogether. Somewhere in all the frustration and multitude of letters, reports, rumors, etc., those two things seemed to get confused. “e issue was not with the index itself, but the way that it was being used,” said Spoores. Mills all support the CRU index, he added, but can’t live with the discounts being made. e CRU provides accurate, third-party data, he said, but how the index is then used is not entirely under the CRU’s control. e index, and its widespread use, is not likely to disappear anytime in the near future, and the way prices on the index are generated is not going to change, either, according to Spoores and Cooney. Like individuals everywhere, buyers and sellers of steel constantly search for some sense of stability and assurance. Without it, it’s nearly impossible to plan ahead, and in many cases, remain profitable. Economists and steel analysts have repeatedly emphasized the eﬀect of the short market cycles in the US domestic steel market over the last few years. Spot prices in arguably the most volatile of steel products, flat rolled, endure multiple upswing and downswing cycles per year, making it diﬃcult to predict the direction of prices a few weeks out, much less where prices will be six months to a year from now. e CRU index, therefore, provides a level of transparency to the market, and is used a tool for buyers and sellers to plan their next moves. In order to preserve the integrity of this price mechanism that has been in use for over 30 years now, CRU hired a major international accounting firm, KPMG, to carry out a third party audit. KPMG works with each data provider and conducts an onsite audit of a sample of large data providers, representing both mills and buyers. But even after the dust settles—by early fall, the number of CRUminus deals dropped substantially, but did not entirely disappear, either—Spoores and Cooney are unsure whether the kind of rampant deal-making that defined the first half of the year will creep back into the market sometime in the near or distant future. But “if one guy was able to get a deal,” said the head of sales at one Southern service center. “it won’t be long before everyone else is SO \ asking their supplier for the same discount.”

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Volume 6; Issue 4

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Striking a balance

Q&A with Bob Weidner

President and CEO

Metals Service Center Institute (MSCI)

SteelOrbis San Diego speaks with Bob Weidner, President and CEO of the Metals Service Center Institute (MSCI), about the political and economic obstacles facing steel service centers.

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“green” and other energy sources. Instead we need the focus to be on the best ways to meet our energy supply needs. Sometimes it is necessary to modify regulations when they do little more than discourage new energy production. We also need to encourage the development and deployment of cost-eﬀective, energy-eﬃcient and environmentallyfriendly technologies and open up more federal lands to oil and gas exploration. MSCI members are strong and proud stewards of our natural resources and support environmental policies that protect our environment, but we do not support taxing our way to a clean environment. e best program for the environment is prosperity. Prosperity breeds innovation of new, cleaner and less wasteful technologies. Reactionary and impractical regulations and taxes will dampen this innovation.

Also in June, US senators introduced the Currency Exchange Rate Oversight Reform Act of 2013. How has the bill fared so far in Congress, and do you believe it will garner bipartisan support from the Senate and House of Representatives? BW: Based on what has happened to similar bills in the last two sessions and the signals we are receiving from Washington, we doubt that anyone is serious about passing it. It also does not appear that the president will support or sign it, so we aren’t optimistic about it. Volume 6; Issue 4

What other legislation currently being discussed in Congress does MSCI believe would have the most profound impact on the US domestic steel industry? BW: e whole regulatory issue is one of real concern for our members and the entire metals industry. For example, the Environmental Protection Agency’s (EPA) “sue and settle” practices: groups sue and the EPA settles, often without regard for consequences. Another concern is conflict minerals. e Dodd-Frank Wall Street Reform and Consumer Protection Act, and similar proposals being discussed in Europe and Canada, attempt to track and regulate the use of minerals originating in the Democratic Republic of Congo. Metals are highly recyclable, making it burdensome to track the source of the input materials. As you might imagine, these regulations have significant impacts and repercussions for businesses, which includes the cost of doing business that were not considered when the rules were written. OSHA has established that, as part of its regulatory inspections, they have the authority to take union reps into non-union shops. Why? e National Labor Relations Board (NLRB) has a real pro-union perspective, passing card check instead of a real union election. By checking a box they pass a whole suite of regulatory issues that don’t work well in a cost-benefit analysis. ere has been a change in the way EPA calculates economic impact; it has become a subjective “social impact” measurement. is is a problem because this calculation is used to promote legislation and write regulations showing societal benefits without regard to the cost of doing business. ere comes a point when businesses can’t exist under so many costs. When it comes to health care, our members are concerned about the administration’s ability to keep all the promises that they made. ey also question the government’s ability to implement and audit the new Affordable Care Act-mandated healthcare delivery system. What do you consider to be the biggest issues facing service centers at the moment? BW: ere are five issues of great importance

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In June, the MSCI publicly disagreed with President Obama’s regulatory plan to address climate change in the United States. What energy strategy does MSCI believe would be the most beneficial to the US steel industry? BW: MSCI has a policy agenda that discusses issues important to the entire metals industry—steel, aluminum, stainless steel, copper and brass—and specifically our members. We support an “all of the above” energy policy that uses all available energy sources. It is imperative lawmakers pass a national energy policy that produces reliable and affordable energy from all domestic sources to grow the metals and manufacturing industry. US energy demand will increase an estimated 25 percent in the next 20 years. is country struggles to balance conservationist demands and industry needs; as a result, little happens. If we don’t create new energy sources—traditional and green—the reliability of US energy supplies will decrease as the costs rapidly increase. Producers of steel, aluminum, specialty metals, copper and brass need to pull large amounts of energy and know they are available and will not bring down a grid, even in off hours. e United States must explore power production from all sources—coal, nuclear, oil and gas, wind and solar—to ensure the stable energy sources that manufacturers and metal production require. Energy is a huge opportunity for growth in many sectors that are affected by the metals supply chain. Stalled energy projects have already cost the economy $1.1 trillion and nearly 2 million jobs. What’s important now is for Washington to focus on fostering innovation and not choosing winners or losers—in the energy sector or anywhere else. For example, new EPA and administration energy regulations will initially increase energy costs, but could curtail energy supplies—forcing even higher energy prices—if coal-fired power plants are forced to choose between investing billions to retrofit old plants or closing the plants to avoid these economically unsustainable investments. Federal agencies are too focused on the reduction of carbon emissions without regard to the broader economic impact of them. Currently there is discrimination between

Interview

facing service centers, and they each play a role in the future success, security and growth of service centers: demographics, technology, regulation, globalization and consolidation. Demographics: ere is a shift in the younger generations and millenials. Currently, the baby boomers hold most of the top executive jobs, but there is a relatively large hole in the 35-50-year-old ranks because the industry went through a massive reorganization 20 years ago. is hole could present succession-planning challenges in the future. However, the majority of the companies have done a good job of recruiting millenials; and for those that are looking for opportunities to make meaningful contributions early in their careers, there are tremendous opportunities. Similarly, there are recruitment opportunities for companies within the industry that understand that there are differences between recruiting millenials and baby boomers. ose organizations that recognize generational differences and at the same time embrace diversity will continue to attract top talent. Globalization: 25 years ago businesses as a whole were much more localized, or at least limited to a particular region or country. at is not true today and many factors beyond the local area or country of location play into the forces impacting our industry and our members—such as the European financial crisis. Technology: Technology is advancing at such a rate/speed that so many things are able to be done within the company and not outsourced. Processes have evolved and become much more efficient and automated. One example is the advent of 3D printing. Consolidation: e last 10-plus years have seen a significant increase in the rate of consolidation within the industry, changing the face of it. ere are now more “mega” companies with broader product lines, increased brand recognition and servicing/spanning not only regions but countries, providing worldwide coverage. Government regulation: A perfect example is conflict minerals, as detailed above. Legislation meant to regulate the banking industry has a clause added in about conflict minerals and mandating that even traces of

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certain minerals must be traced and reported to the SEC. ese and others can have a profound impact on the industry’s success and growth.

What do you think companies within the metal supply chain must do to appeal to rising young talent? How can companies ensure the strength of their leadership for decades to come? BW: Innovation is vital to attracting new talent and maintaining a strong talent pool to an organization. e metals supply chain has been doing what good entrepreneurs do— innovating—for more than 100 years. New technologies and methods have been discovered and embraced—such as computerized inventory management systems, lean processes, and metallurgical compositions that make products more useful to their respective end markets. is innovation epitomizes the free enterprise system that has made the nation great. e more companies innovate, the better their products and services, and consequently the better the opportunities for employment they provide. Talent will migrate toward companies that have a comprehensive human resources strategy including the proper culture centered on recruitment, development and mentoring, and compensation. In particular, the companies that see their employees as assets—sources of revenue—rather than liabilities will continue to attract the best talent. And the same is true for retaining your top leaders: it’s all about how you treat your people. Treat them with honor, dignity and respect, and chances are they will continue to build that same goodwill toward your enterprise. As global variables impact the industry more and more, how can organizations protect themselves and plan for a crisis that may impact their business? BW: In business today, there will be unforeseen challenges. ings happen more frequently and more forcefully than in previous generations because of our global economy. First, there are just some things you can’t plan or anticipate. How a person responds is a testament to his or her leadership. ose that adapt quickly will be the most successVolume 6; Issue 4

ful. Take the 2008-2009 recession—no one predicted that. e companies that processed those unforeseen “Black Swan” circumstances the fastest and reacted quickly and efficiently to disruptive business forces are those that are thriving today. Why? Many of them used those diﬃculties as an opportunity to build on strengths of the past and become more innovative. e alternative to adapting in the midst of business model disruption is denial. And of course those in denial are the ones that will struggle. Second, in instances where a challenge is foreseen, several tools are vital to an organization’s survival. e three that I see as most important are big data, scenario planning and risk management.

MSCI recently joined a Tax Coalition. What actions do you hope to see taken in tax reform? BW: Comprehensive tax reform is very important; many of our members’ incomes flow through S-Corp entities and therefore they are paying an individual tax rate. Our members want the same tax rates for S-Corps and for C-Corps; if the rates are diﬀerent it is a competitive disadvantage. MSCI recently helped launch the Coalition for Fair Eﬀective Tax Rates, a new group of more than 100 organizations arguing for comprehensive tax reform at the federal level. e group represents large and small businesses seeking to reform the tax code to spur economic growth, add jobs, increase fairness and reduce complexity. Our members pay income taxes through both the corporate and individual rate systems. With that in mind, tax reform must be comprehensive—lowering the corporate tax rate and rates for the small businesses or pass through entities that pay individual tax rates. In total, the Coalition represents approximately 500,000 businesses, ranging from some of the nation’s largest corporations to local businesses that employ only a handful of workers. All believe that the tax code is broken and a burden on American job creators. It’s important to make the tax code simpler—and reduce confusion and the amount of money small and large businesses spend to comply with code. SO \

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A slap on the wrist

Will AK Steel’s $3.5 million EPA fine work as a deterrent? AK Steel announced on August 21 that it reached a settlement agreement with the US Environmental Protection Agency (EPA) and the Commonwealth of Kentucky after reportedly failing to comply with the Clean Air Act and AK Steel’s Title V permit—both of which regulate air pollutant levels—resolving a myriad of allegations that had been levied against AK Steel’s now-closed Ashland coking plant. Under the terms of settlement, AK Steel will pay a civil penalty of $1.65 million, of which $25,000 will be paid to the Commonwealth of Kentucky. Although the plant involved in this enforcement action has been closed for more than two years, the steelmaker is currently operating the Ashland West Works steel mill a few miles away from the former coke plant. Under the agreement, AK Steel has further agreed to spend at least $2 million on state projects to reduce particulate matter emissions at the still-running facility. Company representatives said the coking plant was shuttered in 2011 because it was no longer cost competitive. is was largely tied to the need for increased maintenance and what AK Steel describes as “increasingly stringent environmental regulations.” e plaintiﬀs in the suit have said they are nonetheless pleased with the outcome. “is settlement holds AK Steel accountable for years of violations at its now closed coke plant in Ashland,” said Robert G. Dreher, Acting Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. “As a result of this agreement, state projects to reduce particulate matter emissions at the Ashland West Works facility will continue to improve air quality for area residents for many years to come.” US Attorney for the Eastern District of Kentucky Kerry B. Harvey agreed: “is settlement promotes a healthier environment for our citizens and represents a just resolution of this matter,” he said. “We are com-

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mitted to the eﬀective enforcement of the environmental laws designed to protect the health of our people.” What’s perhaps most interesting is that the agreement was reached without requiring AK Steel to admit to any of the alleged violations, especially since this is not the first time the steelmaker has bumped heads with environmental regulators. In June 2000, the US and the state of Ohio announced legal action against AK Steel, charging the company violated several environmental laws at its Middletown, Ohio facility.

Air pollution: Bad for the environment, bad for bottom lines

at suit was filed by the Justice Department, on behalf of the US EPA, and Ohio Attorney General Betty Montgomery, on behalf of the Ohio EPA. e court filing asserted that the Middletown plant violated the Clean Water Act, the Clean Air Act and a hazardous waste statute. AK Steel was alleged to have polluted an Ohio River tributary in addition to having emitted a largely uncontrolled amount of pollutants into the air. e matter was eventually settled out of court. As part of the settlement, the company agreed to clean up Dicks Creek, which runs between the plant and an adjacent elemenVolume 6; Issue 4

tary school. Floodplain soil and sediment were removed. Soil which was found to have the highest level of contamination was taken to a landfill that was approved to receive hazardous waste. Lesser contaminated soil was taken elsewhere. AK Steel further agreed to allocate about $66 million to pollution-control upgrades. At the time, local residents were pleased with the outcome, but 11 years later, they questioned exactly how eﬀective these sanctions were. In December 2011, the Center for Public Integrity reported that a local asthmatic said the pollution was still very bad and that he couldn’t sit on his porch for more than a few minutes before pollutants would start to snowfall into his coﬀee mug. A total of five AK Steel locations, including the Middletown facility and the Ashland coking plant, were listed on the EPA’s Clean Air Act Watch List during that same month. A company spokesperson told the Center for Public Integrity that they did not know why the company remained on the Watch List because “they had complied with regulations.” One year later, AK Steel facilities in Ashland; Mansfield, Ohio; Butler, Pennsylvania; Rockport, Indiana; and Middletown continued to be listed on the Clean Air Act Watch List. e EPA’s most recent Watch List data was released in June of 2013. As of then, a total of three locations were still listed: Mansfield, Rockport and Middletown. e Ashland coking plant has since been closed and operations at the Butler plant have been cleaned up, but until that point, the Butler stainless plant had long been scrutinized for abusing the environment. In March 2000, the EPA was contacted by a citizens group in the Borough of Zelienople, a small town outside of Pittsburgh, Pennsylvania. Residents frequently used the adjacent Connoquenessing Creek as a secondary source of drinking water during periods of drought when its primary source

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Creek and provide bottled water to users of wells that produce nitrate-contaminated water. ey were also to eliminate nitric acid from the pickling processes used at the AK Steel facility on or before October 31, 2002 and to pay $60,000 to the town for improvements of its drinking water system. In 2004, AK Steel settled with the EPA and the Justice Department over their alleged environmental violations. As part of that arrangement, the company agreed to pay a $1.2 million settlement consisting of a $300,000 penalty and a further agreement to fund $900,000 in projects that would be geared toward helping reduce smog-producing ozone in Pennsylvania. is cleanup eﬀort has been deemed a success. Today, Borough of Zelienople is now seeing nitrate levels from the Connoquenessing of approximately 2 ppm. But has the steelmaker really taken these previous lawsuits to heart? is question seems to be lingering on the minds of many, and taking into consideration AK Steel’s history, some have questioned why the company wasn’t more harshly penalized for their

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alleged Clean Air Act violations at the Ashland coking plant. e EPA, however, says it is pleased with the outcome of the case. at sentiment has been further resonated by the Commonwealth of Kentucky. “We don’t consider this to be a slap on the wrist,” said Commonwealth of Kentucky Oﬃce of Communications and Public Outreach Executive Director Dick Brown. “ey are paying the federal government and are undertaking a state-only supplemental environment project at the cost of $2 million. Kentucky will also be getting $25,000 in penalties. “e important thing for us is that the issues have been addressed,” he said. “AK Steel has stepped up and come to the table to get this agreement done. ey are agreeing to pay fines and undertake positive projects that have a positive impact on the environment going forward.” AK Steel General Manager of Communications and Public Relations, Michael P. Wallner said the company has no further comment beyond the content of their most recent press release. SO \

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of water was insuﬃcient. e claimants alleged that water withdrawn from the Creek—which AK Steel used for pollution discharge about 21 miles upstream—contained high concentrations of nitrate. An investigation was promptly opened. e EPA found that AK Steel was discharging nitrate into the creek at a rate of over 20,000 lbs/day, even though the Pennsylvania Department of Environmental Protection had determined that the Butler facility would need to meet a nitrate limit of 999 lbs/day to protect the downstream drinking water intake. e EPA subsequently determined that this discharge caused imminent and substantial endangerment to those consuming drinking water drawn from the creek. In March of 2001 the EPA and AK Steel signed an Emergency Order on Consent. e order required AK Steel to provide potable water to the residents of this town by installing a reverse osmosis system to remove nitrate at their water plant. ey were further required to perform a survey of wells along the Connoquenessing

US Congressman takes on radioactive scrap metal recycling plan In the spring, Rep. Ed Markey, a Democrat from Massachusetts, introduced legislation to stop a Department of Energy proposal that would allow up to 14,000 metric tons of its radioactive scrap metal to be recycled into consumer products. e Department of Energy is pushing to implement its proposal to sell oﬀ the radioactive metal as scrap, which could then be used to create jewelry, cutlery, or other consumer products, potentially exceeding safe doses of radiation without any knowledge by the consumer, according to Markey. In 2000, then-Energy Secretary Bill Richardson first suspended the DOE’s radioactive recycling eﬀorts in response to concerns raised by Rep. Markey and others. ey were worried that the DOE would not be able to assure public safety as radioactively contaminated metals could have been turned into everything from baby spoons to jewelry to medical devices that are implanted into the human body. In December 2012, however, the DOE proposed to do away with the ban on radioactive recycling. In January of this year, Rep. Markey sent a letter to then-Secretary Steven Chu express-

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Light Gauge Stories

LightGaugeStories

ing concerns about the proposal. Rep. Markey’s legislation was cheered in May of this year by the trade association representing American steelmakers, groups concerned with public health eﬀects of irradiated metal, and many others. “By prohibiting the sale, trade, barters, or transfers of any metal that has been used or stored in a radiological area, this legislation will help ensure an uncontaminated scrap metal supply that is vital to the prosperity of the US and North American steelmaking industry,” wrote omas Gibson, the President of the American Iron and Steel Institute (AISI).

College professor develops new high strength steel Despite being one of the world’s oldest materials, steel composition is still constantly being researched, altered and improved. Warren M. Garrison Jr., a professor of materials science and engineering at Carnegie Mellon University, has developed a new ultra-strength steel of high fracture toughness that is significantly less expensive to manufacture than existing products. e new steel contains no cobalt and only a relatively small amount of nickel, and therefore is much less expensive than other

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ultra-high strength steels of high fracture toughness—all of which contain large amounts of both. Garrison has a patent pending for the new steel, the innovation of which was one of the outcomes of a US Navy-funded Small Business Technology Transfer (STTR) Program. One of the objectives of the STTR program was the development of inexpensive, ultra-strength steel with high fracture toughness that could be used in Navy aircraft applications.

Siemens and LanzaTech to recycle steelmaking CO2 into new energy source In June, Siemens Metals Technologies and LanzaTech signed a 10-year cooperation agreement to utilize the fermentation technology developed by LanzaTech, transforming carbon-rich off-gases generated by the steel industry into low carbon bioethanol and other platform chemicals. e companies explained that off-gases from the production of iron and steel contain significant amounts of carbon monoxide (CO) and carbon dioxide (CO2). Globally, the iron and steel industry contributes 6.7 percent of the worldwide CO2 emissions. To produce one metric ton of steel, an average of 1.8 metric tons of carbon dioxide (CO2) is emitted. Up to now, these gases have been flared or used to create process heat and electrical energy within the plant. Instead, LanzaTech’s technology reuses the off-gases from converter, coking plant or blast furnace processes as nutrients and a source of energy. e patented biological fermentation process allows steel plant operators to make use of the chemical energy contained in off-gases in the form of CO, CO2 and H2 (hydrogen) for the eco-friendly production of bioethanol or other basic chemicals such as acetic acid, acetone, isopropanol, n-butanol or 2,3-butanediol. Another major benefit of this technology is that the CO2 emissions (carbon footprint) are between 50 to 70 percent lower than petroleum-based fuels and around one-third lower than when steel plant off-gases are converted into electricity.

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non-reflecting solar cells on the roof to the motor or in strong sunshine to the battery, where it is stored for use in dull weather. “e drive system delivers the required mechanical and electrical properties,” said Benjamin Geiger, one of the students on the team who already took part in the roundthe-world tour by the predecessor model, SolarWorld GT, in 2012. Soon, the solar car motor will face its first major test: In October it will compete in the solar car world championships in Australia, a 3,000 kilometer race from Darwin to Adelaide. At previous events, the German team—which will be up against nine other international teams—has always done well in

The PowerCore SunCruiser will compete in the solar world championships in Australia later this year.

choose between two specializations: electronic technician and electromechanical equipment and facilities technician. e Roberto Rocca Technical School, named after the late former president of Tenaris, promotes social integration and equal opportunities through a system of grants, Tenaris explained. All students can obtain scholarships of at least 50 percent of the total cost. After assessing the socio-economic situation of each family, the school’s authorities define the percentage of the tuition that will be covered by the scholarship. Today, 33 percent of the students have a full or almost full scholarship. e new school is the first of a global network of institutions that will promote technical education in Mexico, Brazil, Colombia, United States, Romania, Indonesia and other countries where Tenaris operates. e aim is to promote long-term industrial sustainability and development through excellence in SO technical education. \

Photo courtesy of Bochum University of Applied Sciences

motor of the new vehicle. Stefan Spychalski, who has been working on the solar car project at Bochum University of Applied Sciences for over 10 years, called the use of electrical steel in the car “revolutionary.” For the first time, the motor is made with electrical strip from yssenKrupp Steel Europe (Bochum site) and subsidiary yssenKrupp Electrical Steel (Gelsenkirchen site), giving it a heart of steel. e material is a special soft magnetic steel used mainly in motors for eﬃcient power transmission. Hub motors are installed in each of the solar car’s front wheels and transmit power directly to the tires, eliminating large transmission losses. e natural energy flows directly from the

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the Australian rally, receiving commendations for concept, speed and design.

Tenaris opens technical school in Argentina Paolo Rocca, Tenaris Chairman and CEO, and Daniel Scioli, Governor of the Province of Buenos Aires, inaugurated the Roberto Rocca Technical School, located close to Tenaris’s mill in Campana, Argentina, in early June. Tenaris invested US$25 million in the new building and the facilities include wide green spaces for recreational purposes and sports. e school has a capacity for 420 students and holds state-of-the-art scientific equipment and facility. e students can Volume 6; Issue 4

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ThyssenKrupp partners with university for solar car design In late July, Germany’s largest steelmaker, yssenKrupp, presented the “PowerCore SunCruiser” to the public, a high-tech solarpowered car fitted with electrical steel from yssenKrupp Steel Europe. e solar car is a functional vehicle, looking almost like a conventional car, with space for up to three people and a trunk. e development—the first of its kind in the world—will be put to the test at an international solar car rally in Australia in October. Experts from the Bochum University of Applied Sciences in Germany and specialists from yssenKrupp Electrical Steel spent months working on the

WorldEconomicReport

Summer economicstormslinger

iguratively speaking, the global economy was beset by several thunderstorms this summer. Some were passing through, others have been lingering for a while, and two major shocks are still roiling the global economy. In the US, the Federal Reserve has ever so gently indicated that it may gradually phase down its ultra loose monetary policy or quantitative easing program (QE), and in China the new government is determined to live with slower growth in an eﬀort to rebalance the economy and contain the overheating credit market and its inherent financial risks. Both these essentially domestic decisions had a quick and negative impact on the rest of the world and especially on the emerging markets. Brazil continues to disappoint in its growth rate and its currency has swung from being too strong to being too weak. India’s rupee has hit new lows this summer and its economic growth continues to be lackluster. Russia is coping with a high inflation rate and subsequent high interest rates that keep investments low. Add to the mix the eurozone’s perma-recession and you will understand why the forecast for the rest of 2013 will be no less turbulent than the stormy summer. Americas: In the US, the economy has stayed on its frustrating course to take a step backwards for every two steps forward. In the final reading, growth in the first quarter had to be revised from 2.5 percent to 1.8 percent. e initial growth rate for Q2 of 1.7 percent is lower still, but came in higher than expected. And yet, there are other signs that point to optimism. Based on a gradual improvement in the labor market, soaring home prices and strong car sales, the very important Consumer Confidence Index reached a five-year high in June but, true to form, retracted somewhat in July. e Leading Economic Indicators stayed flat during the summer after having risen sharply in the spring. Likewise, Industrial Production and Manufacturing Industrial Production lost their momentum in the summer months after showing impressive gains in the spring. Construction spending has remained flat for some time. After a strong start in January, total construction spending was up just 1.4 percent in July at an $875 billion SAAR (seasonally adjusted annual rate). After the initial announcement by the Federal Reserve regarding its bond buying program, the equity markets around the world went into a collective tailspin causing the Fed Chairman, Ben Bernanke, to back away somewhat from his earlier comments to soothe the markets. Despite all its frailties, the US still seems to be the one country that is best

suited to regain pre-crisis growth levels and thus pull the global economy out of its current lethargic state. Latin American growth, on the other hand, has been stunted by the sharp downturn of its largest economy, Brazil. Softer demand for commodities and the resulting price drops have added to the general problem. e first half was not good for the area, but indications are that the second half of 2013 will recover some of the earlier losses. e combined growth rate for Latin America could still hit 3 percent for the year. Mexico’s growth in 2013 will likely drop to 2.9 percent, down from 3.9 percent in 2012. As fiscal and energy reforms begin to show a positive impact, the growth rate for 2014 should accelerate to 3.8 percent. Steel Production North America YTD June 2013 (‘000 mt): 59,115mt (-5.8%) Steel Production South America YTD June 2013 (‘000 mt): 22,535mt (-4.6%) Total Vehicle Production in NAFTA countries YTD June: 8,417,342 units (+3.2%) Total Vehicle Production US YTD June: 5,666,485 units (+5.4%)

GDP – latest quarter Consumer Prices latest compared to previous one and previous year and forecast 2013

Industrial Production year-on-year

Steel Production YTD June in ‘000 mt and compared to last year

United States

+1.7% Q2/+1.9%

+1.8% Jun/+1.7%

+2.0% Jun

43,232 (-6.4%)

Canada

+2.5% Q1/+1.8%

+1.2% Jun/+1.5%

-0.1% May

6,300 (-9.1%)

Mexico

+1.8% Q1/+2.9%

+4.1% Jun/+4.3%

+0.5% May

8,931 (+0.1%)

Brazil

+2.2% Q1/+2.0%

+6.7% Jun/+4.9%

+1.4% May

16,974 (-2.2%)

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percent. And that is the oﬃcial number; the real one is probably higher still. Youth unemployment is oﬀ the chart and, in a way, really does not matter much any longer. e young are emigrating and the Spanish population shrank 0.7 percent last year. At the heart of it all is the never-ending housing crisis. Real estate experts estimate 2.2 million homes are either on the market, or held by banks, or in foreclosure proceedings or still being built. at is a high number for a country with an annual housing market of 240,000 and a shrinking population. So, give it another 10 years of housing misery. Instead of having to swallow the harsh medicine of fiscal austerity, Spain should go on a radical reflation strategy. Spain needs growth rates of 5 percent for a sustained period of time and to stop the slow process of unrelenting asphyxiation it is undergoing now. Suerte. Steel Production June 2013 to last year: European Union (EU 27): Other Europe: CIS Countries (6):

year-to-date in ‘000mt and compared 84,297mt (-5.1%) 18,322mt (-4.0%) 55,008mt (-3.0%)

GDP-latest quarter compared to previous one and forecast 2013

Consumer Prices latest and 2012 number

Industrial Production year-on-year

Steel Production YTD June 2013 in ‘000 mt and compared to last year

Germany

+0.3% Q1/+0.3%

+1.9% Jul/+1.9%

-1.1% May

21,720 (-0.9%)

France

-0.6% Q1/-0.3%

+0.9% Jun/+1.9%

+0.4% May

8,025 (-4.3%)

Italy

-2.6% Q1/-1.8%

+1.1% Jul/+3.1%

-4.2% May

12,683 (-14.7%)

Britain

+2.4% Q2/+1.0%

+2.9% Jun/+2.4%

-2.3% May

5,723 (+25.0%)

Spain

-0.4% Q2/-1.7%

+2.1% Jun/+1.9%

-1.3% May

7,547 (0.0%)

Russia

+1.6% Q1*/+2.8%

+6.9% Jun/+4.3%

-0.2% Jun

34,704 (-2.9%)

Turkey

+3.0% Q1*/+3.5%

+8.3% Jun/+8.9%

+1.9% May

17,408 (-2.9%) *Y.O.Y.

Asia: As China is trying to decelerate its economy in an orderly fashion, the world is watching an acceleration process in Japan. e country had succumbed to an inevitable aging process with one of the worse demographics in the world. e indebtedness of Japan, the highest of all OECD countries, rocketed into the stratosphere a few years ago as the country entered a 15-year-long deflationary down spiral. Birth rates are irresistibly shrinking, advancing the graying of Japan. As deflation and demography were feeding oﬀ each other, the social fabric began to change ever so subtly. Jobs became more precarious and ever fewer young men had tenure track jobs, marriage rates of the 20 and 30 year olds started plummeting and Japan developed an army of what they call “Parasite Singles” i.e. 3 million young people aged 35–44 living with their parents. Since it remained a fairly rich country with a high standard of living, Japan has avoided the worst of the consequences of the aging process so far. Until a crucial election

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late last year Japan was well on its way to settle into a genteel decline. en, however, in came Premier Shinzo Abe with a vision of stopping and perhaps changing the socio-economic decline. With a little help of some friends at the Bank of Japan, a US-style bond buying program was installed (the BOJ is printing almost as much money as the US Federal Reserve in an economy one-third the size), the Yen was devalued (“talked down” if you prefer, but it has lost 22 percent of its value since October 2012) and confidence in Japan’s debt load was restored. “Abenomics” as this process is called, seems to work—at least for now. e economy has roared back to life with an impressive growth rate of 4 percent over the last two quarters. Japanese exports have jumped 7.4 percent from a year ago and inflation is on its way up to the target of 2 percent. e retail sales index in Japan reached bottom in January 2011 when it had gone down to 93. By this summer, the index was up to 103.

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Europe: e eurozone remains stuck in the longest recession of its short history, lasting for six consecutive quarters. Es reicht, Frau Merkel und Herr Schauble (German Minister of Finance)! In the first quarter of 2013, the aggregate GDP contracted another 1.1 percent yearon-year and expected results for the second quarter do not look all that hot, either. Still, the German-instilled mantra remains unchanged: fiscal austerity and paying back debts. Sounds good, but as the entire southern fringe of the eurozone is chafing under this doctrine, the question needs to be asked: when is enough enough? A case in point is Spain. Successive Spanish governments have been trying to abide by the strict mandates of the European Central Bank and by member countries such as Germany. Budgets are being cut with dramatic consequences to the social welfare of the Spanish people. In Spain, internal consumption was slashed by 16 percentage points of GDP without facing a social explosion yet. It is safe to say, however, that it is boiling right beneath the surface. According to the International Monetary Fund, the Spanish economy will shrink around 1.7 percent this year and, at best, will stagnate at zero growth next year. e unemployment number is an incomprehensible 26.3

WorldEconomicReport

GDP – latest quarter compared to previous one and forecast 2013

Consumer Prices latest and 2012 number

Industrial Production latest twelve months

Steel Production YTD June 2013 in ‘000 mt and compared to last year

China

+7.0% Q2/+7.5%

+2.7% Jun/+2.2%

+8.9% Jun

389,870 (+7.4%)

Japan

+4.1% Q1/+1.8%

+0.2% Jun/-0.1%

-4.8% Jun

54,711 (+1.2%)

South Korea

+4.4% Q2/+3.1%

+1.4% Jul/+1.5%

-2.6% Jun

33,059 (-5.3%)

Taiwan

+2.4% Q2/+2.3%

+0.6% Jun/+1.8%

-0.4% Jun

11,571 (+9.0%)

Malaysia

+4.1% Q1*/+4.4%

+1.8% Jun/+4.4%

+3.4% May

India

+0.4% Q1/+5.8%

+9.9% Jun/+9.9%

-1.6%% Jun

39,637 (+2.5%)

Australia

+2.2% Q1/+2.5%

+2.4% Q2/+1.2%

+3.6% Q1

2,363 (-1.8%) *Y.O.Y.

Africa / Middle East:

GDP-latest quarter compared to previous one and forecast 2013

Industrial Production

Unemployment

South Africa

+0.9% Q1/+2.1%

+2.1% May

25.6% Q2

Saudi Arabia

+5.1% (2012)/+3.5%

5.5% (2012)

Egypt

+4.9% Q1*/+2.0%

-3.1% May

13.2% Q1

Israel

+2.9% Q1/+2.7%

-1.4% May

6.2% Q2 *Y.O.Y.

SpecialFocus: Germany By now it has become common knowledge that Germany is the dominant member of the eurozone if not of the entire European Union. Without Germany’s financial muscle the common currency would probably have floundered some time ago. Like it or not, countries such as Greece, Italy and Spain are increasingly dependent on the goodwill from Berlin. ere is, however, a common wisdom that says demography is destiny and, similar to Japan, Germany is not doing too well in that department. In fact, Germans ought to be nice to their fellow Europeans because there are signs that fortunes will reverse in the not too distant future. e numbers are bleak: according to the European Commission’s Aging Report 2012, Germany’s population will shrink from its current level of 82 million people to 66 million in the next 50 years. It may even be lower since the German census data were adjusted down in May because of miscounting foreigners who had gone home. During the same time frame, the population in Britain and in France will increase to 74 million and 79 million, respectively. e old-age dependency ratio of Germany will jump from 31 percent in 2010 to 36 percent in 2020. e workforce will shrink by 200,000 a year this decade. It will get worse as this century progresses— by 2045 the old age ratio will be 57 percent. It is fair to say that Germany is at the zenith of its economic output right now and it is unlikely to get any stronger. In fact, it can only go down from here. A decade ago, Germany was considered the “sick man” of Europe. en crucial labor reforms (Hartz IV) were introduced that sparked a manufacturing renaissance of epic proportions. Some cynics called these reforms “wage compression”; in 2005 unit labor costs in Germany fell 4.4 percent. One of the not-so-pleasant side eﬀects was that income inequality between rich and poor rose faster in Germany than in any other rich country since then, while life expectancy is falling for poor Germans. Germany’s boom is entirely derived from increasing exports led by the all-conquering German car industry. It is mirrored by persistent ineﬃciencies at home combined with a somewhat lackluster domestic market. Annual productivity per German worker grew by just 0.6 percent from 2000– 2010 compared to 1.4 percent for the OECD countries as a whole. Because of its highly innovative engineering sector, Germany still ranks at number 6 in the World Economic Forum’s table of competitiveness. Still, there are five countries ahead of them and the above conditions will actually force Germany down in this particular ranking.

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CoverStory

Shallow waters, elusivefunds

With a growing global economy and expanding Panama Canal, US ports are in a race to accommodate larger shipsâ&#x20AC;&#x201D; yet the funds generated for just that purpose remain out of reach.

onthly press releases and yearly reports from ports around the US have shown remarkably positive results during the stilted economic recovery, especially when it comes to steel imports and exports. For instance, the Port of Charleston, South Carolina saw a 30 percent increase in bulk and breakbulk cargo in fiscal year 2013, with steel wire rod comprising a large portion of the jump. Additionally, the Port of Houston reported that bulk cargoâ&#x20AC;&#x201D;including coal and steelâ&#x20AC;&#x201D;increased 23 percent in June from the previous yearâ&#x20AC;&#x2122;s monthly level. Steel cargos also jumped at the Port of Philadelphia in June, up 30 percent from June 2012, strengthening a growing trend that could see the port celebrating the fourth-straight year of double-digit cargo growth by the end of the year.

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But underneath the strong growth, swelling profits and optimism for the future, there are issues and concerns that bring nearly all the ports together in solidarity. Chiefly among them is the imperative to deepen harbors and waterways to accommodate the trend for larger vessels. While many point to the expansion of the Panama Canal leading to larger Panamax vessels available to berth at US ports as the impetus for deepening, some, such as Stan Swigart, Market Development Manager for the Port of Houston Authority, says it’s the other way around. Attributed to the “economy of scale,” Swigart said that “larger ships are being built because they’re more eﬃcient, and the canal expansion is a reaction to that.” Either way, two facts remain: time is running out for ports to dredge their harbors deep enough to accommodate the larger vessels; and the funds to facilitate dredging— generated from ample port tax revenue—are not as available as they should be. Little trust in the trust fund e Harbor Maintenance Trust Fund (HMTF) was established as part of the Water Resources Development Act of 1986, enacted to fund the US Army Corps of Engineers’ routine operation and maintenance of 13,000 miles of commercial deep-draft ship channels and 12,000 miles of commercial inland waterway channels, serving 41 states. e taxes levied for the fund are assessed on the value of imported and domestic cargo handled at the port at a rate of $1.25 per $1,000 in cargo. Importers generate about 95 percent of the tax revenue—exporters have not paid the tax since 1998 when the US Supreme Court ruled that taxing them was unconstitutional. Each year, Congress appropriates funds from the trust for harbor maintenance, but despite the over $1 billion raised annually for the HMTF, expenditures have remained comparatively flat, leaving an enormous surplus ($6.95 billion at the end of fiscal year 2012). And yet, according to the US Army Corps of Engineers, the busiest harbors in the US are not being fully maintained, let alone deepened to accommodate larger vessels. In fact, full-channel dimensions are only available for less than a third of the time

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for dozens of high-use US harbors. e Corps warns that under-maintained channels increase the risk of ship groundings or collisions, as well as raise the cost of shipping by requiring ships to carry less cargo to reduce their draft and causing bottlenecks as ships wait for high tide.

But even ports without significant dredging needs feel slighted by the HTMF’s system of disproportionate expenditures. According to Michael Gold, Director of Communications and Community Relations for the Port of Long Beach, “the Ports of Long Beach and Los Angeles receive negligi-

Lack of dredging can lead to lost revenue and grounded ships

So why are US ports currently scrambling to find private funds for their dredging activities, when the federal funds they have specifically generated for that purpose are apparently abundant? Part of the reason is that a significant portion of the fund’s disbursements go to harbors that handle little to no cargo. For example, according to a report by the Congressional Research Service, Grays Harbor in Washington State is the 15th most expensive harbor channel to maintain, withdrawing roughly $12 million from the HMTF each year, yet it ranks 133 in total cargo handled by US ports. Comparatively, the ports of Seattle and Tacoma use a combined total of about $2 million in HMTF disbursements per year while handling around 44 percent more cargo than Grays Harbor. Considering Seattle and Tacoma bring in significantly more cargo-related tax revenue, it’s troubling that they do not get a bigger piece of the HMTF pie. Volume 6; Issue 4

ble HMT funds due to not having significant maintenance dredging needs—however, the two ports remain the highest collection points for the fund.” Indeed, after contributing around 32 percent of all HMTF receipts, California ports only receive about 8 percent (based on FY2011 records). To remedy the situation, the Port of Long Beach seeks to expand the uses of the HMTF to make disbursement more fair, proposing the following policy recommendations: full utilization of HMTF revenues for Operations & Maintenance (O&M) purposes; prioritization of HMT funds for use on traditional O&M purposes, including maintenance of federal navigation channels, disposal sites, selected in-water projects; more equitable return of HMT funds to the system of ports in California; and a cost-share formula for maintenance that reflects the current cargo fleet (-45 to -50 feet). e Pacific Northwest Waterways Associ-

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A new bill to enforce an old act While plugging budget holes with unrelated revenues is nothing new in Washington, D.C., Congress continually raiding the HMTF has drawn enough attention to spur some lawmakers into action. Back in 2010, several bills were introduced to either change the tax rate or how HMTF revenues are spent. One bill aimed to remove appropriation of the funds from Congress and give the Army Corps of Engineers more autonomy over spending. Another bill proposed to spend away the HMTF surplus to guarantee it went toward its intended purpose. Other

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A new HMTF policy faces many barriers in the Capitol.

bills weren’t as helpful, such as one that simply asked to increase the existing tax rate, and another that sought to shift the burden of dredging channels with little to no commercial traﬃc onto the ports themselves. As varied as the proposals were, they all had one thing in common—they never made it out of committee. Much later, in February 2013, US Senator Sherrod Brown of Ohio reintroduced the Harbor Maintenance Act, which would ensure that funds deposited in the HMTF would actually go toward maintenance, operation, and construction at federal ports. More recently, a bipartisan pair from the House of Representatives wrote a letter to the head of the Corps while the Senate considered a new Water Resources Development Act (WRDA) in May. In the letter, Representatives Janice Hahn of California and Ted Poe of Texas stated the obvious: “We are taxing American consumers and American businesses to ensure that our ports are fully dredged, and failing to deliver on our end of the bargain.” “American families and businesses feel the cost of that failure twice over—when they pay the Harbor Maintenance Tax, and again when they pay the higher costs of using harbors that have not been maintained,” the letVolume 6; Issue 4

ter writers continued, seemingly unaware that the Corps is not the problem—the elected oﬃcials who are spending the Corps’ promised funds are. e new Senate bill, meanwhile, would guarantee that “the expenditures from the HMTF will equal receipts in each fiscal year”—boosting activity for not only regular maintenance and operations, but new projects on the ports’ wish lists like increasing the default federal channel depth to 50 feet instead of 45 feet. e bill would also prioritize projects, giving first-in-line status to high-use deep draft ports (those that move 10 million tons of cargo or more a year and are maintained at a depth of 14 feet or greater). But despite eﬀorts to pass the bill before the summer recess, it continues to languish “at the desk” due to petty infighting among Senators trying to add on mostly unrelated amendments, such as an attempt by Senator Tom Coburn of Oklahoma to add in a provision that would allow gun owners to carry firearms into recreational areas. “I just want to lay it out here for the American people,” said Senator Barbara Boxer of California, “this is a public works bill dealing with water infrastructure. … It is not a bill about guns.” Senator Boxer, one of the bill’s sponsors, also pointed out that the bill would create half a million jobs in the US, underlining why it was so important to “avert and avoid so much controversy.” Although the House of Representatives plans to introduce their own version of the WRDA bill, it does not seem as if it will suffer any less from partisan bickering. News sources reported in late spring that House Transportation and Infrastructure Committee Chairman Bill Shuster of Pennsylvania said the Senate’s version of the WRDA “would give too much power to the Obama administration to pick projects that will receive funding by delegating those decisions to the Army Corps of Engineers,” apparently assuming that a Congress that can’t pass a waterways bill without fighting about guns would do a better job of identifying and funding harbor maintenance projects in an expeditious fashion. More trade, more expansion, more

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ation shares similar policy recommendations, while pushing to expand the narrowly-defined uses of the HMTF by lobbying to create a Freight Trust Fund to meet port intermodal needs—including highway/railway maintenance and operation that is just as crucial to the ports as deep harbors. “Ports are increasingly part of networks or systems of transportation delivery that depend on properly maintained infrastructure,” said Josh omas, Marketing and Media Relations Manager, Marine and Industrial Development of the Port of Portland. “Linked to ports are railways, bridges and highways. As such, when one mode fails or is imperiled, the broader transportation network linked to the other modes will also fail.” e skewed revenue/expenditure dynamic in California and Washington State is relatively benign in light of what’s happening in Washington, D.C. In 2012, over $1.5 billion was collected in the fund, but only $927 million was spent—the remaining balance and surplus have been used to “plug federal budget holes” in a move that Janine Moreau Mansour, Commercial Manager of the Port of New Orleans, described as criminal. “We have to dredge around the clock to maintain a depth of 45 feet,” said Moreau Mansour, noting the port uses a contracted dredging company to keep up. “It’s not fair that we have to fund it ourselves, rather than rely on all the fees from importers and ports that go into the fund.” inking further down the road, she said that a new bill to dredge the Mississippi River to 50 feet would be ideal, but of course, “it all depends on getting those funds.”

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financing problems Whether the new WRDA is passed or remains hostage to legislative ineﬃciency, it appears that ports might not have to rely on HMTF funds for other projects that are just as vital to keeping up with the US’ shipping needs as dredging. During a visit to the Port of Jacksonville, Florida in July, President Obama promoted his administration’s eﬀorts to use executive orders to expedite federal review and permitting for infrastructure project around the US, including two in Jacksonville: dredging the port to 47 feet from 40 feet, and speeding up a rail yard project that will streamline the exchange of shipping containers from ships to trains. Understanding how much US ports are struggling to keep up with the growth of global trade, Obama said, “Where I can act on my own, I’m going to act on my own. I won’t wait for Congress.” Some interpret his reliance on executive orders as a way to bypass Congressional Republicans who are resistant to approving fur-

The list goes on

ther stimulus funds for public works, but there is no argument that the projects are necessary—the only question is how to fund them. e Port of New Orleans is using a combination of existing stimulus funds and state money to build a $27 million intermodal rail facility, but the port doesn’t plan on stopping there: two more container cranes to double the port’s current capacity is on the wish list, which could cost upward of $450 million. Instead of trying to garner all the funds at once, the port is moving forward with the project incrementally, spending smaller chunks of money over the course of 15 years or so. Elsewhere in the Gulf, private investment is ramping up to meet expanded transportation needs. Houston-based Kinder Morgan recently proposed a $400 million expansion of three coal terminals that will include an expanded railway system, new access roads and additional capacity for coal storage. e company’s goal to eventually export 27 mil-

lion tons of coal annually from the Gulf was spurred by environmental-related diﬃculties moving coal from mines in Montana and Wyoming to Pacific Northwest ports—the shortest path to Asian coal consumers. But the Panama Canal expansion will make routes through the Gulf just as feasible, and with possibly less restrictions. If legislative bottlenecks continue to squeeze ports at a time when they need all the funding they can get, they might have to eventually look elsewhere for their dredging support, as they currently do for other expansion and development projects. But it will no doubt be frustrating for ports to hold out their hands for financing when they should have $7 billion in surplus funds at their fingertips. So maybe while they’re devising their strategy to scoop up new business when the expanded Panama Canal opens, they can devise ways to put pressure on their elected leaders to actually do their jobs and represent the interests of their SO \ state—including the ports.

Trouble accessing HMT funds is not the only issue plaguing US ports

Labor Costs Aside from ever-increasing cost of doing business with labor unions at many ports, most ports have to at least contend with the increasing burden of pension funds on their budgets. With the average age of retirement hovering around 61, the Baby Boom generation (born 1946-1964) is only just starting to tap into their long-awaited pensions.

Environmental regulations Although many ports, such as the Port of New Orleans, have taken a proactive approach to environmental eﬀorts, others have come up against significant pushback concerning not only how ports are operated, but what products they can handle. e Port of Vancouver recently dealt with controversy in its decision to approve a lease for the Northwest’s largest crude oil terminal, and environmentalists are mounting a campaign against the Kinder Morgan coal terminal (mentioned earlier), alleging it will threaten local air quality.

Security challenges Cargo screening at all major US ports became imperative after the September 11 attacks, but despite plans announced by two separate administrations, little progress has been made due to—ironically—federal regulations. Completion dates for upgrades necessary to screen cargo at the Port of Charleston have been pushed back to 2024, while the deadline to scan all incoming containers for radioactive material before they reach the US passed by this summer without action. Trade legislation Antidumping and countervailing duties might be a boon to US domestic steelmakers, but they can be a bust for major US ports. Stan Swigart of the Port of Houston said the upcoming decision regarding OCTG pipe from nine countries could seriously impact import business at the port, considering how much steel pipe usually flows through. And for ports that serve as a gateway to the Mississippi River, less barges heading north with trade-restricted imports can cause barge supply issues for the many heading south with coal, grain, and other heavily-exported products.

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USTransportationUpdate

USTransportationUpdate First half of 2013 compared to 2012

Rail:

Total T otal C Carloads: arloads: 7,217,899 ( ( 1.5%) Total T otal IIntermodal: ntermodal: 6,270,438 ( ( 3.6%)

Trucking: ATA A TA Trucking Trrucking Tonnage T Tonnage IIndex: ndex: 4.7%

Shipping:

US Vessel Vessel IImports: mports: 0.3% (tonnage) US Vessel Vessel E Exports: xports: 1.1% (v (value) alue) US Gr Great G reat Lakes B Barge arge C Cargo: argo: 32.7 million (( 4.6%)

Sour Sources: ces: Association of American Railways, Railways, American TTrucking rucking Association, Lake Lake Carriersâ&#x20AC;&#x2122; Association, Zepol, US Census Bur Bureau, eau, US Department Depar of Commer Commerce ce

General: TTotal otal US TTrade rade (seasonally adjust adjusted) ed) Exports: E xports: $1.124 trillion (( 2.1%) Imports: Imports: $1.367 trillion (( 0.95%) Balance: Balance: -$242.1 billion (( 12.9%)

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Total Total US St Steel eel TTrade rade Exports: E xports: 5,880,367mt (( 10.9%) IImports: mports: 14,271,761 ( ( 10.75%)

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Interview

to the

Playing it close vest

SteelOrbis Brescia discusses the opportunities available for regional steel suppliers with Giuseppe Ferrero of Tuxor.

uxor is a leading European company that supplies steel materials for civil and petrochemical engineering industries. Since the foundation of Tuxor by Giuseppe Ferrero, the company has shipped thousands of tons of structural steel, building materials, pipes and fittings and non-ferrous metals to customers all over the world. Tuxor operates in many markets, but especially in Africa, the Middle East and Central America. riod of crisis that the global economy has faced. Tuxor’s activities will be increasingly directed to provide foreign companies with more international projects and increase penetration in expanding markets.

Can you describe Tuxor and its history? GF: In 1984 I decided to take the “great leap” and start Tuxor. is need arose from the desire to manage the business and financial strategies of a company promoted and created by me, relying only on my own resources, as if it were a new peak to climb. Since then I have committed fully, day and night, sometimes at the expense of time that I wanted to dedicate to my family, which fortunately has understood and supported me in this adventure that I’m still living today with the same enthusiasm of 30 years ago. Tuxor’s philosophy is to be a solid, energetic and active company which marks rigor and seriousness as its strengths. Our field of

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activity is the export of steel and piping products around the world.

How do you assess the company’s results in recent years, not only in terms of turnover? What are the prospects for 2013? GF: e results are positive, since the areas of market penetration and the categories of exported products have gradually progressed in order to adapt to changing market demands and to changing economic and political contingencies of the diﬀerent reference countries. In the last 5-10 years, the positive trend has strengthened, despite the prolonged peVolume 6; Issue 4

Which product groups are you involved with and what are your reference markets, both for supply and for sales? GF: e material that accounts for the majority of our revenue is rebar, along with all structural materials such as welded mesh, beams, profiles, etc. as well as piping products, tubes, fittings, flanges, nuts and bolts. In recent years, spare parts for earthmoving machines have represented an interesting slice of our sales. e market that we favor for our supplies is Italy, because we believe strongly that the quality of the materials produced in our country has nothing to envy from the materials produced abroad. In addition, the relationships that have been established with major Italian authorities encouraged the conclusion of diﬃcult and complicated negotiations. Obviously, given the international nature of our business, our purchases take place in all of Europe, and in the future we intend to cross these boundaries and to extend the range of our suppliers to Asian countries. We don’t actually have “reference markets” for sales because in recent years we concluded orders in “unusual” markets that did not fit into our regular range, such as Mauritania, Panama, Tanzania, South Africa, and Australia. What are the most profitable markets? Are you looking for new outlets?

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You operate at all levels of the distribution chain. How would you describe your service to customers? GF: Our service to customers is aimed to be a complete, accurate and competent help in the supply of structural and piping materials for construction and engineering companies. We can provide large volumes of material, but we follow our customers even for small volumes that sometimes are particularly important for operations in their projects. What are the main challenges that Tuxor is facing today? GF: Despite the excellent results obtained so far, because of the global crisis, the main challenge we face every day is to be able to

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e market that is characterized by greater demand is undoubtedly Algeria, but it certainly does not coincide with the most lucrative market. balance our cash flows and to obtain timely payments for our supplies. is problem unfortunately aﬀects all businesses in all sectors, and not only in Italy.

What effects did the crisis have on your business and your strategies? In your view, where are we in the recovery process? GF: One of the most important eﬀects of the crisis is undoubtedly the global decline in inquiries due to construction and engineering companies’ lack of financial coverage. is has resulted in a number of new and old projects that are still on hold. Unfortunately, I think that the recovery is not as forthcoming as we all hoped and concluding profitable orders will be a tough challenge through the remainder of 2013. I do not see any signs of recovery in the markets we fol-

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low, and this, despite my innate optimism, does not bode well for a prosperous 2014.

What do you think of the European Union’s policies in the import/export field? GF: e European Union does not operate a policy of support to the economies of European countries, first increasingly stiﬀening the fiscal and commercial constraints, and also allowing emerging countries to act indiscriminately, without restrictions in their commercial aggression. European countries are not protected by these incursions into the European economy, and do not find a mutual agreement on how to react in selfdefense.

Despite the advent of the digital age, do you believe that trade fairs and conferences such as the SteelOrbis & IREPAS conference are still an important opportunity to meet with competitors and new business partners? GF: Yes, I do, because the direct and individual relationships that are established at these fairs cannot be replaced by digital contacts, and are enriching in terms of knowledge and deep analysis, as well as a discovery of new incentives and initiatives. SO \

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Interview

GF: e market that is characterized by greater demand is undoubtedly Algeria, but it certainly does not coincide with the most lucrative market because the high concentration of sources and supply in this country results in very low prices. In recent years we have been trying to provide materials that are outside our usual range, and the fruits of our labor that we have collected so far encourage us to continue on this road.

TradeLawWatch

OCTG from everywhere: The resurgence of steel trade cases

or the first six months of 2013, US manufacturers of specialty and downstream steel products actively pursued antidumping (AD) and countervailing duty (CVD) cases against a variety of products from sources in Asia and Mexico. However, on July 2, the trade landscape changed dramatically when US pipe producers filed AD and CVD petitions against oil country tubular goods (OCTG) from nine countries in one of the largest trade cases to be filed in the past decade. e first of the specialty steel cases began in March when omas Steel Strip filed an AD petition against diﬀusion-annealed, nickel-plated steel flatrolled products from Japan. According to the petition, this specialty product is produced by Toyo Kohan, Sumitomo-Nippon Steel, and Katayama Special Industries for use in alkaline batteries and fuel lines for automobiles. e US International Trade Commission (ITC) made a preliminary determination that imports from Japan are causing injury, and the US Department of Commerce (DOC) formally initiated a full-scale dumping investigation. e estimated dumping margins range from 57 percent to 78 percent. e DOC’s preliminary dumping determination will likely be issued by the end of October 2013. Toward the end of April, two US wire companies—Insteel Wire Products and Davis Wire—filed AD petitions against prestressed concrete (PC) steel rail tie wire (a downstream steel product) from China, Mexico and ailand. is wire product is used as a prestressed tendon in concrete rail ties. e ITC made an aﬃrmative preliminary injury determination, and the DOC has initiated dumping investigations. e estimated dumping margins are 67 percent for China, 159 percent for Mexico, and 54 per-

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cent for ailand. e DOC’s preliminary dumping determinations are likely to be issued before anksgiving. en, in May, Bristol Metals, Felker Brothers, and Outokumpu Stainless Pipe filed a petition against imports of another specialty steel product—welded austenitic stainless steel pressure pipe—from Malaysia, ailand, and Vietnam. e ITC made an aﬃrmative preliminary injury determination at the end of June, and the DOC initiated

AD investigations. e estimated dumping margins are 23–24 percent for Malaysia, 24 percent for ailand, and 89–91 percent for Vietnam. e DOC’s preliminary dumping determinations are likely to be issued by mid-December. Finally, a petition involving another downstream steel product—steel threaded rod from India and ailand—was filed in June by All America readed Products, Bay Standard Manufacturing, and Vulcan readed Products. e estimated dumping margins range from 18-120 percent for India and 63-75 percent for ailand, and there is also a CVD case involving 11 subsidy proVolume 6; Issue 3 4

grams in India. e DOC is likely to issue its preliminary subsidy determination by anksgiving and its preliminary dumping determinations by the end of January 2014. While these cases are important to the industries that brought them and to the countries that are targeted, these cases are limited in both the number of producers involved and the sizes of the markets. By contrast, the OCTG cases filed in July were filed by nine US producers: United States Steel, Maverick Tube, Boomerang Tube, Energex Tube, Northwest Pipe, Tejas Tubular Products, TMK IPSCO, Vallourec Star, and Welded Tube USA. e lineup at the ITC’s preliminary hearing shows the size and complexity of these investigations. e US industry is represented by three law firms, and each submitted a separate written brief following the hearing. Eleven law firms submitted briefs on behalf of producers in India (nine mills), Korea (nine mills), the Philippines (one mill), Saudi Arabia (one mill), Taiwan (five mills), ailand (one mill), Turkey (three mills), Ukraine (one mill), and Vietnam (two mills). Representatives of steel trading companies also appeared at the hearing and submitted briefs. e DOC has already initiated AD investigations of India, Korea, the Philippines, Saudi Arabia, Taiwan, ailand, Turkey, Ukraine, and Vietnam and CVD investigations of India and Turkey—11 investigations in all. e estimated dumping margins range from 13-240 percent for India, 66-159 percent for Korea, 46-56 percent for the Philippines, 53 percent for Saudi Arabia, 68-71 percent for Taiwan, 118 percent for ailand, 45-47 percent for Turkey, 26-31 percent for Ukraine, and 103-111 percent for Vietnam. In addition, the DOC will investigate 60 alleged subsidy programs for Indian producers and 16 alleged subsidy programs for Turkish producers.

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TradeLawWatch

e DOC will conduct separate AD and CVD investigations of each country. e first step in the DOC’s investigations will be the selection of mandatory respondents who will receive the DOC’s questionnaires. Except for Vietnam (which is subject to a diﬀerent selection process because it is treated as a non-market economy country in AD cases), the DOC will generally select the two or three producers in each country that accounted for the largest share of imported OCTG during the period from July 1, 2012 through June 30, 2013. If a foreign producer is not selected as a mandatory respondent, it can submit a voluntary response to the DOC’s antidumping questionnaire. However, there is no certainty that the DOC will calculate a separate dumping margin for such a “voluntary respondent” even if it submits a complete response. In fact, it is unusual for the DOC to use a response submitted by a voluntary respondent unless one of the mandatory respondents does not participate. In that event, the DOC has sometimes accepted a voluntary respondent as a substitute mandatory respondent. For producers that are not selected as mandatory respondents, their margins will usually be determined by an average of the margins calculated for the mandatory respondents. e DOC is currently scheduled to issue its preliminary determinations in the CVD investigations of India and ailand by September 25, although it is likely that these decisions will be postponed to November 29. e preliminary determinations in the AD investigations of all nine countries are currently due by December 9, but again it is probable that this date will be extended to January 29, 2014. e dates of the DOC’s preliminary determinations are critical because imports which are entered on or after these determinations are published in the Federal Register (which is usually three to five business days after the due date) are required to deposit the preliminary dumping and/or countervailing duties. In addition, liquidation of those entries will be suspended until the DOC completes its investigations and the final duties are determined in 2014. e enormity of the OCTG cases is clear when one compares them with the other steel cases filed in the first half of 2013. Collectively, the four sets of AD and CVD cases filed between March and June involve seven countries and 86,000 tons of imports valued at $162 million in 2012. By contrast, the OCTG petitions against nine countries cover imports of 1.6 million tons in 2012 with a total value of $1.8 billion. In both tonnage and dollar terms, the OCTG cases are the largest steel trade actions since the 2009 AD and CVD investigations of OCTG SO \ from China.

Frederick P. Waite and Kimberly R. Young Vorys, Sater, Seymour and Pease LLP (Washington, DC)

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Interview

AND

Can slow steady win the race?

SteelOrbis Shanghai discusses market trends and the implications of emerging economic factors with Qian Yong, General Manager of the International Trade Department, Shandong Shangang Group.

What is your view of the recent steel market? What do you think are the main factors causing the current sluggish trend? QY: Recently, though domestic steel production remains in slow growth mode, with low fixed asset investment in steel industry, overcapacity is still the biggest problem for the whole industry. Luckily, the domestic economy is edging up after hitting bottom and that is having a positive impact on steel consumption. Currently, thanks to a series of stimulus measures, steel demand from some downstream industries has improved. Overall, steel prices in China during the remainder of 2013 will likely trend lower before climbing back up. e rising cost of financing and the declining profitability of steelmakers are the key reasons causing sluggishness in the steel industry. erefore, it is much more important to reach balance among supply, demand, and capacity.

What role is Chinese import and export of sections playing in the international market? QY: Among the global markets, steel industrial concentration is much higher in developed countries than in developing countries. China’s concentration is about 20-30 percent of developed countries, a low level. Despite overall output of sections rapidly increasing, import of China’s medium and large sections has gradually decreased, while exports have increased significantly. In the first half of 2013, section prices experienced ups and downs, while prices now move more steadily. However, the export volume of medium and large sections is still limited, hardly aﬀecting international section prices. What is the impact of the current macroeconomy on the overall steel industry? 46

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QY: Overall, last year was the “winter” for China’s steel industry. ough it still faces various challenges and diﬃculties in 2013, the steel industry has also met new development opportunities, and the market will be better than it was last year. First, the global economy will remain at its low-speed growth, stimulating a certain degree of market demand for the global steel industry. However, demand from major economies is still weak, despite a series of measures that have been taken to stimulate the economy and boost growth. Meanwhile, various kinds of trade protectionism have increased. For instance, currently, trade conflict has been seen more and more in ASEAN and EU regions, which limits China’s steel exports to those areas. However, China’s steel industry will have a golden opportunity to develop the domestic market. According to the Eighteenth National People’s Congress, by 2020, China’s GDP and average per capita income will double compared to 2010. e deep structural reform, creative development strategy, structural adjustment, city and countryside integration and more open economy will be realized during these years. e target of GDP to double in 2020 indicates that China’s economic development will grow on average at 7.5 percent, which will boost China’s steel industry. As for development after 2013, it is believed that growing urbanization, urban railway and railway investment will be key factors to support steel consumption. In addition to infrastructure, steel consumption is coming mainly from real estate, machinery manufacturing, auto, shipbuilding and home appliances—all of these are expected to grow in 2013. In general, from the key elements to Volume 6; Issue 4

boost China’s economy of investment, demand and export, China’s steel output will possibly grow at a low speed. At the same time, China’s GDP growth will shift to medium and low speed of 7-8 percent from over 10 percent previously. Currently, domestic consumption has contributed 51 percent to GDP growth, exceeding investment and export. Since 2011, steel consumption per RMB 100 million GDP has been down to 1,370 mt from 1,657 mt, down by 287 mt per RMB 100 million. us, China’s steel industry will hardly keep growing at a pace of over 10 percent, with estimates pointing closer to 2-3 percent per year. And crude steel output will remain at 700 to 800 million mt per year, with high capacity, high cost and low price as the common situation.

What’s your forecast for section prices in the next three to six months? What will likely happen to the steel industry in the near future? QY: ere is no doubt that the steel industry still has a broad market space as China is going through its urbanization period. However, the steel industry has entered into a steady-increase stage, which will suffer from high capacity, high cost and low efficiency for the long term. Accordingly, creation will be the most effective tool to develop a company. As for 2013, supply-demand correlation and inflation will be the key elements for the steel industry. With the transformation of China’s economy, some steelmakers with low efficiency will inevitably be eliminated. In addition, currency volume will also affect steel prices as it will have impact on companies’ financing costs. SO \

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WSDStrategicInsights

WSDStrategicInsights: A shift is brewing in steelmakers’ metallic balance

orld Steel Dynamics forecasts that the global metallics balance growth in 2013 will shift disproportionally as hot metal consumption growth outpaces demand for steel scrap. Assuming global steel production reaches 1,571 million metric tons (mt) in 2013, 1,948 million mt of metallics are required for crude steel and foundry production (up 1.5 percent year-over-year from 1,919 million mt in 2012), of which: • Pig iron/Hot metal accounts for 1,142 million mt, up 3.1 percent year-over-

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year from 1,107 million mt in 2012. • DRI accounts for 74 million mt, up 1.3 percent year-over-year from 74 million mt in 2012. • Steel scrap accounts for 732 million mt, down 0.8 percent year-over-year from 738 million mt in 2012. Based on trends in blast furnace output through the first six months of 2013, hot metal production growth is on track to more than double the pace of crude steel production growth. is is largely the result of un-

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balanced growth in hot metal output relative to crude steel production in Advanced Countries, China and Developing World exChina.

For additional information on WSD’s services, please contact us at: wsd@worldsteeldynamics.com Or visit our website at: www.worldsteeldynamics.com

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SupplyLines

MERGERS & ACQUISITIONS

Despite four years since the “official” end to the recession, uncertainty still pervades the US domestic steel industry. Further, with import concerns for commodity-grade products remaining prevalent, many US-based operations continue to move higher up the value chain with acquisitions that focus on diversification. Worthington takes majority share of TWB Worthington Industries announced July 31 that it closed on an agreement with Wuhan Iron and Steel Company (WISCO) to become the majority member in Tailor Welded Blanks (TWB), its laser welded blanking joint venture. Immediately following WISCO’s acquisition of yssenKrupp’s ownership in TWB, Worthington acquired an additional 10 percent share, bringing its ownership in TWB to 55 percent. TWB has strong ties to the automotive market, working with customers to reduce the weight of vehicles and help decrease manufacturing costs. WISCO is a leading steel mill in China and one of the world’s largest steel producers. As a result of the acquisition, the TWB joint venture will now be consolidated with the Steel Processing segment of Worthington Industries. Terms of the agreement were not and will not be disclosed. Energex Tube and Metal One announce pipe supply agreement Energex Tube, a division of JMC Steel Group, announced in early July that it agreed to a deal with Tokyo, Japan-based Metal One Corporation, oﬀering semi-premium connections for use in North American oil and gas drilling. Metal One’s proprietary connections will be oﬀered in North America by Energex Tube. ese connections include, but are not limited to: GEOCONN—a semi-premium casing connection in sizes 4.5” OD through 20” OD, for use in drilling with casing applications and SAGD (steam-assisted gravity drainage), as well as geothermal wells; and SUPERMAX—a tubing and casing non-upset connection in sizes 1.900” OD through 4.5” OD, with better clearance and improved work string capability.

MRC Global to acquire Flow Control MRC Global reported June 18 that it signed an agreement to acquire the operating assets of Dan H. Brown, Inc., D/B/A Flow Control Products (Flow Control). Founded in Odessa, Texas in 1981, Flow Control is a leading provider of pneumatic, electric and electro-hydraulic valve automation packages and related field support to the Permian Basin energy industry, including production facilities, pipelines, and plant operations. Flow Control will operate as an MRC Valve Automation Center. Concurrent with this transaction, MRC is expanding its existing facility in Odessa into an 110,000 square-foot Regional Distribution Center. When completed in 2014, the Flow Control business will operate from this newly expanded facility.

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General Steel acquired by Houston-based Triple-S Steel In early June, Georgia-based service center General Steel Inc. announced that it was acquired by Texas-based service center Triple-S Steel Holdings. Terms of the transaction were not disclosed. With locations in Texas, Louisiana, Tennessee, Utah, Colorado, California, as well as Colombia and Chile, Triple-S stocks merchant bars, sheet and strip, pipe and tube, as well as steel plate products, complementary products to those handled by General Steel. is is Triple-S’ first expansion into the southeast. Henry Oliner, president of General Steel, remained with the company but now serves as senior vice president of Triple-S Steel of Georgia. Severstal NA and US Steel dissolve Double Eagle partnership Severstal North America announced July 15 the decision to dissolve its Dearborn, Michigan-based Double Eagle Steel Coating Company partnership with United States Steel Corporation. Over the past several years, there has been a significant decline in the market demand for electrogalvanized (EG) products and a shift toward the new hot dip coated technology, Severstal said in a statement. After a thorough review of the business trends and conditions by the Board of Directors, the parties mutually concluded that the economic viability of EG production at Double Eagle could no longer be maintained. Severstal North America’s CEO, Sergei Kuznetsov, thanked US Steel for its cooperation over the years and stated that “new products oﬀ our existing facilities will deliver all the benefits of our highly skilled workforce, technology and equipment.”

Suncoke Energy acquires Indiana coal handling operations Lisle, Illinois-based SunCoke Energy Partners, L.P. announced June 26 that it has reached an agreement in principle to acquire the assets, specified liabilities and business operations of East Chicago, Indiana-based Lakeshore Coal Handling Corporation for a proposed purchase price of $29.6 million. Expected to be an all cash transaction, the agreement was scheduled to close at the end of July, subject to execution of a definitive agreement and customary closing conditions. Lakeshore is a unit of privately held, East Chicago, Indiana-based Beemsterboer Slag Corporation and provides coal handling and blending services to SunCoke Energy, Inc.’s Indiana Harbor cokemaking operations. SXCP intends to maintain Lakeshore’s current operations and anticipates retaining its current staﬀ.

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SupplyLines

CAPACITY UPDATES

Changes to capacity in Q2 and Q3 were split between corporations announcing multi-million dollar improvements to existing facilities, and others being forced to idle—either temporarily or permanently—plants that had been in operations for decades on account of weak demand.

Alabama Port Authority to build $36 million steel coil handling facility In late July, the Alabama State Port Authority (ASPA) approved a concession agreement with Alabama Steel Terminals, LLC (AST) to develop a new $36 million steel coil handling facility at the Alabama State Port Authority’s main docks complex. e new rail, truck and barge-served facility will be constructed behind ASPA’s Pier D2 berth located on a 40-foot deep channel. Alabama Steel Terminals will operate and manage the terminal. e new facility will comprise of both covered and open storage areas for steel coil throughput handling. Alabama Steel Terminals, LLC will construct a 372,600 square foot warehouse in two phases. Under Phase I, AST will construct 178,200 square feet of covered bay area equipped with three 50-ton capacity overhead bridge cranes and 168,000 square feet of open storage yard handling an estimated 650,000 tons of steel annually. Phase II development will add 194,400 square foot bay area equipped with three additional 50-ton capacity overhead bridge cranes.

EVRAZ North America orders heat treatment system for Canadian pipe plant In mid-July, German plantmaker SMS Meer announced that it received an order from EVRAZ North America for the supply of a heat treatment system for the steelmaker’s tubular products plant in Calgary, Alberta, Canada. e new heat treatment system will be designed for the heat treatment of up to 30 mt of oil country tubular goods (OCTG) per hour. It will be capable of heat treating of more than 200,000 mt per year of pipes. With this unit, EVRAZ will increase its capacity for heattreated pipes by over 150 percent and expand its product portfolio to meet the growing need for premium OCTG products. e new heat treatment system is scheduled to go into operation in Q4 2014.

ArcelorMittal Dofasco to shut down coke plant No. 1 Late June media reports indicated that Ontario-based ArcelorMittal Dofasco has decided to shut down its 62-year-old coke plant No. 1 in March 2015, since production does not cover maintenance costs. e shutdown will aﬀect 100 employees but the company believes that the workers could be relocated and there will be no job losses. ArcelorMittal Dofasco will continue to operate its coke-making facilities Nos. 2 and 3, which are 43 and 34 years old, respectively.

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Marmon/Keystone holds groundbreaking ceremony for Pennsylvania service center In mid-June, Marmon/Keystone announced it held a groundbreaking ceremony for the company’s new McConnellsburg, Pennsylvania metals service center building. e new facility was expected to be fully operational by September 2013. e current McConnellsburg service center, established in 2004, operates out of leased warehouse space at a nearby location. “e new facility will be 25 percent larger than our current space, which will allow us to handle material in a more eﬃcient manner,” said Lou Grenci, VP Northeastern region. “e extra space will also provide the opportunity to increase our capabilities, enabling us to take on additional business.”

Weak demand forces Alpha Natural Resources to idle met coal mine In June, Bristol, Virginia-based Alpha Natural Resources idled its underground coal mine in Boone County, West Virginia due to weak demand for metallurgical coal. In addition to demand, prices and overall challenging market conditions were cited as factors in the mine’s closure. In its quarterly financial report in early May, Alpha was candid about the coal market, explaining that the supply/demand picture for lower quality met coals remains imbalanced, and these coals are being discounted, pressuring margins which may trigger additional production cutbacks. In general, conditions in the metallurgical coal markets remain challenging, said Alpha.

Midrex to improve direct reduction plant at JSW facility in India Charlotte, North Carolina-based Midrex Technologies reported July 29 that the company and India-based steelmaker JSW Steel Ltd. have signed a contract to modify the existing MIDREX Direct Reduction Plant located at JSW-Dolvi Works (formerly JSW Ispat, Ltd.), located on the coast in the state of Maharashtra, India, to utilize coke oven gas (COG) to supplement its natural gas supply for production of direct reduced iron. e project, scheduled to be completed within 16 months or less, will use COG as a supplement to its natural gas intake so that the DR plant will be able to eﬃciently operate under a wide range of operating parameters, oﬀering maximum flexibility to JSW Dolvi Works.

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SteelMarvels

USSRonaldReagan San Diego, California

or many United States citizens, supporting US troops is about as American as apple pie. In most cases, people think of support as hand written letters and overseas care packages. Others imagine veterans groups and charitable organizations. Few think of the physical, structural and safety support that is provided by steel construction materials. Former American Iron and Steel Institute (AISI) President and CEO, Andrew G. Sharkey III once remarked the how important the US steel industry is to the nation’s security. “e domestic steel industry has transformed itself into an innovative industry that produces more versatile steels, which serve our military,” he said. Take the USS Ronald Reagan, for example. is Nimitz-class supercarrier is among 10 nuclear-powered aircraft carriers that are currently in service with the US Navy. Ships within this fleet are about 1,092 feet in length and have full load displacements of more than 100,000 lt. ey are capable of sustaining a company of up to 3,200, which doesn’t take into account an air wing of 2,480. To date, they are the largest warships ever built and are capable of carrying between 85 and 90 fixed wing aircraft and helicopters. US Navy statistics indicate the supercarriers are capable of withstanding three times the amount of damage sustained by the nowretired Essex class warships, which were attacked during the Japanese air strikes in World War II. Additionally, thick steel doors divide the ship’s hangars into three fire bays to restrict the spread of fire. In total, more than 500,000 net tons (nt) of steel plate were used to construct the

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Nimitz-class supercarrier fleet. Approximately 70,000 nt of steel were used to construct the USS Ronald Reagan; 50,000 nt came from steel plate. ese vessels carry more than aircraft. ey also carry defensive equipment that can be used to ward oﬀ attacks by hostile missiles and flight crews. is includes NATO RIM7 Sea Sparrow missile launchers as well as a Phalanx CIWS missile defense cannon, which is used to protect against aircraft and

anti-ship missiles. e USS Ronald Reagan, however, was constructed a bit diﬀerently, and uses an RIM-116 Rolling Airframe Missile system. is is a small, lightweight, infrared homing surface-to-air missile that is primarily used as a point-defense weapon. Each RIM-116 system costs about $440,000. e contract to build the USS Ronald Reagan was awarded to Northrop Grumman Newport News in 1984, and the ship’s keel was laid down in February 1998. e total construction cost is estimated to have been $4.5 billion. Part of those costs came from a necessary redesign of the ship island. Ultimately, the Reagan was christened by its namesake’s wife on March 4, 2001. e crew moved aboard about 19 months later, and it was commissioned in July 2003. Her maiden voyage began that same month. President Reagan was not able to attend the commissioning or the virgin launch Volume 6; Issue 4

due to his declining health, but the Navy has pointed out that the ship is the first of its kind to have been named in honor of a living former president. e ship’s maiden deployment did not take place until January 2006. e voyage assisted the US Navy with conducting operations in support of Operation Iraqi Freedom and Operation Enduring Freedom. e ship’s crew was also charged with the conduction of various maritime security operations in the Persian Gulf. e USS Ronald Reagan, like its other Nimitz-class supercarrier counterparts, is forecasted to have a life span of about 50 years. Steel is an essential component in other defense equipment: Abrams tanks are constructed using steel plate—about 87,000 nt was used in the production of 8,500 tanks. Broken down individually, this works out to 22 nt per tank. en there is the up-armored Humvee. ese vehicles are in use by the US Army and their design calls for steel plating around the cab of the vehicle. is oﬀers improved protection against small arms fire and shrapnel. Steel plating underneath is designed to survive up to eight pounds of explosives beneath the engine to four pounds in the cargo area. More than 1 million nt of steel plate have been used in the construction of submarines. e Trident Class subs, for instance, require more than 10,000 nt each; 688 Virginia Class subs consume 4,500 nt and Seawolf subs require 4,000 nt. And, of course, steel plate is used extensively in the construction of aircraft carriers—although in special cases, the steel isn’t brand new. e hull of the USS New York, for example, contains 20 nt of steel that had been salvaged from scrap recovered from the SO \ World Trade Center.

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Interview

Engineers withoutborders

SteelOrbis Istanbul and Shanghai speak with Chen Guangwei, Electrical Engineer with China-based Shanghai JingXiang Industrial about the company’s role in the Turkish steel market.

What are the main markets for your company? CG: Since its establishment in 1995, JX has been dedicated to providing customers all over the world with first-class metallurgical machineries, and our customer region range includes Turkey, Iran, Vietnam, Egypt and beyond. As a result of our hard work, we’ve built over 50 lines throughout the world, including hot rolling lines, pickling lines, cold rolling lines, galvanizing lines, color coating lines, etc. Due to rapid development in recent years, we are now capable of providing turnkey projects to customers. At the same time, JX has provided electrical control service to customers for decades.

Recently, your company has played an active role in the Turkish market. How do you regard the significance of this particular market? What kind of services and solutions could you provide for Turkish customers? Can you tell us a little bit about the customers for which you’ve provided solutions? CG: e Turkish market is an important portal for Europe, the Middle East and North Africa. With its geographical advantage across Eurasia, steady political environment and comparatively low labor cost, our company listed it as the vital market to develop international business. Since 2007, our company has provided a set of solutions for cold rolled and coating processes, and oﬀered various technical improvements for clients. Currently, in TAT Metal, there are HDG, cold rolled, smoothing, degreasing and color coated equipment. Moreover, in a hot rolled diamond plate project, we take part in the project design and development involving international experts, and we finish the design in the host machine.

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What is your company’s key advantage when offering services for your customers? Why do customers choose you as their supplier? CG: Price advantage is the key advantage for Chinese products to draw attention from customers. In addition, by utilizing local channels in sales and global purchasing for spare parts, we make ensure the short response time, convenient and eﬀective communication, and interchangeability of spare parts. Furthermore, we have devoted ourselves to improving product quality. For instance, on the basis of meeting Chinese GB standards, we set higher requirements for European standards as our aim. Last but not least, good after-sales service is a plus for us. We oﬀer life-long after-sales service for current customers, attracting their repeat purchases.

currently set up around the world? CG: Up to now, we have helped set up 27 production lines with various specifications and functions around the world. We have offered more than five integrated plant solutions, and some independent development SO \ and design for clients.

Has the recent sluggishness in the global steel market had any impact on your company? CG: Yes, recent sluggishness within the global steel market does have negative impacts on our business. However, the fact that steel production tends to be more local will give us long-term development opportunity.

As for the future demand for your products, which field do you think has the greatest potential for development? CG: Continuous, long-term demand is in the cards for our products in the futures, and this demand will increase when countries take action to raise more trade barriers for protecting local industries. Our target markets are those countries with a steady political situation, including Eastern Europe, South Asia and the Middle East. How many production lines do you have Volume 6; Issue 4

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Fabricator’sCorner

Fabricator’s Corner

Thermatool simplifies HF welding for diverse API product manufacturer

One of the world’s largest suppliers of ERW pipes has completed the installation of a new 800kW HAZControl™ Technology Dual (induction/contact) Solid State HF Welder at one of their North American facilities. Dedicated to serving the growing demand of the global oil and gas industry, the North American producer chose ermatool to meet API standards required by their customers. e organization has a wide product matrix of API products ranging from 4.5” to 8.6” OD and 0.188” to 0.500” wall pipe. e manufacturer chose ermatool’s HAZControl™ Technology Welder software for the ability to select HF weld power and frequency in ±1kW and 1kHz increments, resulting in industry leading heat input control during welding. To maximize up-time during product change-over, the predictive algorithm built into the HAZControl™ Technology software guides operators to the initial heat settings. When a product has been tested and proven successful, the software allows operators to store and then easily recall welding recipes. is helps to reduce HF welding variability and allows them to increase repeatability regardless of operator know-how or shift-to-shift operations. e Dual welding option oﬀers the manufacturer many product options with the flexibility of using two welding processes, induction or contact, on one welding system. is gives the pipe producer the ability to achieve significant power savings when welding large diameter pipe with High Frequency contact welding, yet still choose the induction welding process when needed. With the new equipment in place, the manufacturer can reliably produce high quality API and Proprietary Grade pipe to meet

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the growing demand of the global oil and gas industry.

Cooper/Consolidated partnership celebrates 10th anniversary with new cranes

Cooper/Consolidated, a strategic partnership between Cooper/T. Smith Corporation and CGB Enterprises, Inc., celebrated its 10th anniversary and the christening of new twin National Oilwell Varco (NOV) AmClyde™ model 28 floating cranes, the “High Tide” and “Bob Frane,”at a May ceremony on the Mississippi River, just outside the Hilton Riverside in New Orleans. “ese cranes are stronger and faster than anything their size,” said Angus R. Cooper III, Group President of Operations at Cooper/T. Smith. “ey also remind us of the Alabama Sports program: at winning is about teamwork and never being satisfied. Our strategic partnership with CGB is one reason we have been able to thrive for the last 10 years.’’ e cranes’ new features drive higher performance and enable greater eﬃciency for the companies’ customers, as well as increase safety, productivity and facilitate training for employees. Reduced noise and emissions are beneficial to workers, residents and the environment. e new features include: Rated for 100,000 lbs. Gross Bucket Work and 310,000 lbs. Gross Hook Work; XQ2000 Caterpillar Gen-Set with a sound attenuated container, which reduces noise, and powers the crane’s AC Variable Frequency Drives; equipped with Wintech CP35000 electric drive winches; no hydraulics of any kind, eliminating the necessity to transfer fluids and the potential for leaks, as well as reducing repair time and expense; 150 ft. of boom, with LED lights running the length and a camera at tip for increased visibility and Volume 6; Issue 4

safety; additional safety cameras in the machine house and electrical room to confirm when workers are on deck; the capability to connect to onboard systems via WiFi, allowing monitoring of the crane, as well as tracking real-time production statistics and maintenance from remote locations; improved swing gearboxes shave 10-20 seconds oﬀ swing time per cycle; an over-speed feature keeps loads moving within safe parameters; two-cable load sharing system decreases wear on the cables, as well as reducing breakage; fully-functional dual operating stations in the cab and machine house; crane controls moved into a pair of joysticks, reducing employee fatigue factor and increasing ease of training; and cab raised to give operators better vision over larger Post-Panamax vessels. American-fabricated and assembled, the new hydraulics-free cranes are the result of safety, eﬃciency and environmentallyfriendly features originally designed and tested in the recently fully refurbished “Marilyn G”, an AmClyde™ 28 tub-mounted stevedoring crane in the Cooper/Consolidated fleet originally built in 1982. With the proven success of the “Marilyn G”, the decision was made to build two new cranes. “We decided to copy her with some improvements,” said Landry. “We ordered both at the same time. e High Tide went into service in December 2012 and the Bob Frane just this month.” With a third new crane in the works, and several in the pipeline for the Refurbishment Program, Cooper/Consolidated is positioning their business for steady growth in the years to come. “We’ve been known for our consistency and reliability for many years and these cranes play a major role in supporting one of our greatest strengths, the seamless door to door logistics packages we provide our

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clients,” says Brent Mahana, Director of Sales & Marketing for CGB Enterprises, Inc. Cooper/Consolidated is a joint operating, sales and marketing partnership between Cooper/T.Smith Stevedoring and Consolidated Terminals and Logistics Co. (a division of CGB Enterprises). Specializing in a variety of transportation and handling services, Cooper/Consolidated employs a strong, diverse asset base that covers many of the industry sectors they serve.

Chicago Clamp Company introduces new framing clamp system Broadview, Illinois-based Chicago Clamp Company introduced in July their 3 Inch Framing Clamp System, which is ideal for supporting roof hatches, exhaust fans, and skylights. e 3 Inch Framing Clamp System oﬀers contractors an engineered solution, cutting project costs, minimizing man-hours, and reducing risks associated with joist loading and roof framing projects.

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e new framing system has a distributed load capacity of 1,000 pounds in upload and download conditions, and it is installed underneath and flush against the flute of the existing corrugated roof deck, eliminating the need for filling materials. e patent-pending 3 Inch Framing Clamp System is bolted into place oﬀering flexibility in framing installation, removal, and relocation as client needs change. e bolted connections eliminate the hazards and risks associated with traditional welding methods. Additionally, no drilling or specialized tools are required. is allows contractors to install framing systems in-house, saving valuable time and resources. A standard 3 Inch System includes: four Jaw Clamps, four T-Brackets, and four pieces of 3” x 2” x 1/8” tubing. e Jaw Clamps slide over the top joist chord and underneath the corrugated roof deck, simplifying retrofit projects. e Jaw Clamps are equipped with a jaw-bolt, which secures the system in upload conditions. Volume 6; Issue 4

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Fabricator’sCorner

New Clyde Cranes christened at company's 10th anniversary

NDC announces new gauge for hot mill applications Irwindale, California-based NDC engineering announced in June its new TVXR-3 X-ray thickness gauge that is specifically engineered for hot rolling mill applications. e TVXR-3 X-ray gauge accurately measures metal thickness by detecting the attenuation of a specifically shaped X-ray beam as it passes through the metal strip. e sensor’s source and detectors are inherently stable and do not require either a sample magazine or target offsets. e TVXR-3 high-flux X-ray source provides stable, repeatable measurement performance. An A/D converter digitizes the measurement signal in the C-frame for electromagnetic noise immunity from adjacent machinery during signal transfer. An efficient application-specific ion chamber, combined with a reliable amplifier and electronic design, ensures the lowest statistical noise at fast measurement time constants down to 2.0ms. e inherent high stability of this gauge allows permanent factory calibration for consistent accuracy over the entire measurement range rather than repeated in-mill calibration about a target thickness. Steel grade compensation is achieved automatically using specific parameters for each grade. As an option for enhanced measurement accuracy, a Complete Physical Model (CPM) calculates a unique set of coefficients for each coil based on its specific chemical composition. e TVXR-3 X-ray gauge has been designed to withstand the hot rolling mill environment and deliver high-accuracy measurement performance through effective cooling and temperature control. To achieve this, an integrated ermal Management System ensures measurement frame stability throughout extreme thermal transitions. Additionally, the system incorporates: an easy-to-use operator interface (HMI); a realtime operating system for processing measurement data, continuously monitoring system status and controlling system functions; and network communications to the mill control platform and management reporting system. SO \

A 360º VIEW OF THE MOST INNOVATIVE TECHNOLOGY AND PROCESSES. FABTECH 2013.

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BrainTeasers

Crossword

45. Class of submarines that require over 10,000 net tons of steel plate 46. Partnered with the Bochum University of Applied Sciences for solar car design

Down

Across 1. 3. 7. 9.

Company whose West Virginia met coal mine was idled in June Pig iron prices on this continent improved in mid-August In the spring, US Steel locked out workers at this Ontario-based mill First North American mill to publicly come out against CRU-minus dealmaking 11. Ranked sixth in CNN’s Expansion of Global Companies list in 2012 15. Head of Indices for the CRU 17. Workers at this Turkish mill went on strike July 15 18. Company LanzaTech partnered with to recycle steelmaking CO2 in June 19. Releases a truck tonnage index each month 22. omas Steel Strip filed an AD petition against certain flats from this country in March 23. e population of this European powerhouse is poised to shrink drastically in the next 50 years 25. Mexican flat rolled prices were buoyed by this demand sector during Q3 28. Non-market economy country named in US trade suit against OCTG 30. Region that has been stuck in recession-mode for six consecutive quarters 31. Professor with a patent pending for a new type of high strength steel 33. Latin American economic growth has been stunted by a downturn in this country 36. Prior to joining Carpenter Technology, Gary Heasley worked for this company 38. Market characterized by greater demand, according to Giuseppe Ferrero 40. e CRU is the clearing index to settle futures on this platform 41. Senator who reintroduced Harbor Maintenance Act in February 2013 42. First name of president of the National Confederation of Steel Distributors (CONADIAC) 43. is steel industry group believes in an “all of the above” energy policy (abbreviated)

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2. Major AHMSA project that opened earlier this year 4. 500,000 nt of this steel product was used to construct the Nimitz-class supercarrier fleet 5. Said trade case against OCTG imports was “too little too late” 6. Holiday that slowed steel production and consumption in Turkey during summer 8. Company that dissolved its Double Eagle Steel Coating partnership with US Steel in July 10. Group that predicts hot metal consumption will outpace demand for steel scrap 12. Partnered with Metal One Corporation in semi-premium connections venture 13. Named new CEO of EVRAZ NA in June 14. Originally enacted to fund the US Army Corps of Engineers’ routine operation and maintenance 15. Controversy over this pricing index defined the flat rolled market throughout H1 16. North American country with largest industrial production increase in June 19. In October, the PowerCore SunCruiser will compete in the solar world championships in this country 20. Number of AK Steel locations still listed on EPA’s Clean Air Act Watch List as of June 2013 21. City where SteelOrbis’ annual Rebar & Wire Rod Conference is held 24. Congressman that took on the DOE’s radioactive metal recycling plan 26. is bill could remove some lock projects from the Inland Waterways Trust Fund 27. e Alabama State Port Authority is building a $36 million terminal to handle this steel product 29. Steelmaker fined $3.5 million by the EPA in August 32. Number of countries named in the US’ AD/CVD petition against OCTG 34. e 39th President of the United States for which a San Diego-based ship was named 35. Releases the Purchasing Managers’ Index at the beginning of each month 37. Headquarters (state) of SunCoke Energy Partners 39. Product group that accounts for the majority of Tuxor’s revenue 41. Scrap grade that fared best during August trading in the US 44. European country that experienced GDP contraction of 2.6 percent in Q1

Volume 6; Issue 4

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week 26 week 27 week 28 week 29 week 30 week 31 week 32 week 33

Rebar

12-25 mm 8-12 mm CIS Turkey Export FOB Black Export FOB Sea (USD/mt) (USD/mt)

week 26 week 27 week 28 week 29 week 30 week 31 week 32 week 33

Min. Max. 575 585 575 585 580 590 585 595 590 600 595 605 595 605 595 605

Average 565 570 580 580 580 585 585 585

Hot Rolled Coils

(2 mm) Russia Export FOB (USD/mt)

(2 mm) Ukraine Export FOB (USD/mt)

week 26 week 27 week 28 week 29 week 30 week 31 week 32 week 33

Min. 500 500 510 510 510 550 550 540

Min. 480 480 480 490 490 510 510 525

Max. 530 530 530 530 530 560 560 560

Crossword Answers: Across 1. ALPHA 3. EUROPE 7. LAKE ERIE WORKS

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Max. 490 490 490 500 500 515 515 530

A3 CIS Export FOB Black Sea (USD/mt) Min. Max. 321 331 327 331 327 336 327 331 329 336 332 336 336 348 338 348

Base Sizes USA Domestic mill price (USD/mt) Min. 694 694 694 694 694 694 694 694

(3-12 mm) China Export FOB (USD/mt) Average 500 525 535 535 545 545 545 545

9. ARCELORMITTAL 11. VILLACERO 15. COONEY 17. ISDEMIR 18. SIEMENS 19. ATA 22. JAPAN 23. GERMANY 25. AUTOMOTIVE

Max. 716 716 716 716 716 716 716 716

USA domestic mill prices (USD/mt) Min. 661 661 694 694 694 705 705 705

Max. 683 705 716 716 716 716 716 716

28. VIETNAM 30. EUROZONE 31. GARRISON 33. BRAZIL 36. SDI 38. ALGERIA 40. CME 41. BROWN 42. RAYMUNDO

Billets week 26 week 27 week 28 week 29 week 30 week 31 week 32 week 33

ST 37 CIS Export FOB Black Sea (USD/mt) Min. Max. 490 495 500 505 500 510 505 510 505 510 510 515 512 515 510 515

Wire Rod week 26 week 27 week 28 week 29 week 30 week 31 week 32 week 33

ST 37 Turkey Export FOB (USD/mt) Min. 505 510 520 530 530 530 530 535

Chinese USA import USA Low carbon Turkish Export DDP Domestic FOB Loaded mill price (USD/mt) Truck USG (USD/mt) (USD/mt) Min. Max. Min. Max. Min. Max. 617 639 705 728 580 590 617 639 705 728 580 590 617 639 705 728 590 600 628 650 705 728 590 600 628 650 705 728 595 600 628 650 705 728 605 610 628 650 705 728 605 610 650 672 705 728 605 610

Cold Rolled Coils

(0.5 mm) Russia Export FOB (USD/mt)

(0.50 mm) Ukraine Export FOB (USD/mt)

week 26 week 27 week 28 week 29 week 30 week 31 week 32 week 33

Min. 620 620 600 615 615 635 635 635

Min. 580 580 580 590 590 595 600 605

Max. 630 630 615 620 620 650 650 650

43. MSCI 45. TRIDENT 46. THYSSENKRUPP

Down: 2. PHOENIX 4. PLATE 5. FERRIOLA

Volume 6; Issue 4

Max. 510 520 530 540 540 540 540 545

Q235 China Local (RMB) including 17% VAT Average 3010 3020 3105 3135 3158 3158 3160 3200

PriceReports

Scrap

HMS I/II 80:20 HMS I/II 60:40 USA Europe Export FOB East Export FOB Coast (USD/mt) (USD/mt) Min. Max. Min. Max. 324 327 305 310 328 330 305 310 328 330 310 315 328 330 310 315 335 340 312 315 338 341 320 325 340 343 322 325 345 347 322 325

Max. 585 585 585 595 595 600 605 610

6. RAMADAN 8. SEVERSTAL 10. WSD 12. ENERGEX TUBE 13. WINKLER 14. HMTF 15. CRU 16. USA 19. AUSTRALIA

(1.0 mm) China Export FOB (USD/mt)

USA domestic mill prices (USD/mt)

Average 575 605 605 615 620 620 620 620

Min. 772 783 794 794 794 816 816 816

20. THREE 21. LAS VEGAS 24. MARKEY 26. WRDA 27. COIL 29. AK STEEL 32. NINE 34. REAGAN 35. ISM

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Max. 794 805 816 816 816 838 838 838

Editor’sCorner

A marriage made in…

fter the 2012 fall election secured a second term for President Obama and left the Congressional and Senate landscape virtually unchanged, it would have been reasonable to assume that the extreme vitriol between the two main political parties would settle down and representatives from each would get down to the boring business of running a nation. But anything reasonable rarely has a place in modern politics, and so American citizens were left shaking their heads at the fiscal cliff/sequester fiasco (ironically self-imposed by Congress), the relentless filibusters of executive appointments (Obama saw 16 in his first term and is projected to face 28 in his second, compared to a total of 20 in the previous 10 administrations), as well as the enormous difficulty in passing basic, recurring legislation that previously saw little scrutiny (such as the Farm Bill, which only passed after the food stamp program was stripped from it). Republicans and Democrats are clearly not interested in working together—even though it’s kind of their job—for no other reason than mutual hatred. Each side believes its views, beliefs, policies, and vision for the US are the right ones, and each side seems hell-bent on not only prevailing in the apparent war for America’s future, but painting the other as evil, corrupt, and certain to destroy everything the founding fathers held dear. Obviously there are complex differences between the parties, but they all seem to boil down to whose interests each side serves. Republicans believe in the virtue of the free market, and by serving the interests of the business community, aim to maintain the US’ dominance in the global economy. Democrats, on the other hand, believe in the virtue of community, and by serving the interests of the people, aim to provide the infrastructure necessary to support the progression of the human race. And yet those goals are not mutually exclusive. To put it another way, instead of the mortal enemies Republicans and Democrats think they are, they are actually engaged in something like a marriage. ey are two dif-

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ferent entities with two different personalities, tasked with the responsibility of running a household (the US) and raising children (US citizens). In order for the household to succeed, it needs steady income. US businesses, which produce goods and services and employ citizens, are the most essential sources of tax revenue, and Republicans are absolutely correct that a stable, welcoming environment for all businesses, large and small, is crucial. At the same time, supporting and raising children into productive, responsible, tax-paying adults is equally vital. e supportive infrastructure championed by Democrats, such as education and health care, has just as much of a stake in the future of the US as the business environment. After all, what’s the use in major corporations setting up shop in the US if there aren’t any qualified employees to work for them? Needless to say, fighting is quite common in most marriages, as are unreasonable requests, ignorant mistakes, stubbornness, and complete misunderstandings—and neither spouse is immune. For instance, in their quest to balance the budget and cut out unnecessary expenditures, Republicans oppose welfare programs with a fiery passion, failing to understand that not every citizen is the type of boot-strapping go-getter that makes our nation thrive. Just as with most families, there are the high achievers, the A-students, the apples of their parents’ eyes—and there are the ne’er-do-wells, the black sheep, the losers who never leave the basement. Should parents love the latter any less than the former? Should they support them any less, especially in times of great need? Of course, Republicans aren’t entirely off the mark when they argue against the abuse of the welfare system and the apparent inability of its bureaucracy to weed out those who take advantage of it. ere are several government programs, not just welfare, that are almost comically inefficient and in desperate need of modernization. But cutting them out entirely, and squeezing other programs nearly lifeless for no other reason than because they consume tax dollars, is not the answer. After the sequester debacle, politicians had the rare Volume 6; Issue 4

chance to experience first-hand the consequence of slashed expenditures: less funds for air traﬃc controllers caused massive congestion in airports around the country. Not surprisingly, after facing delays and cancelations of their own flights, Congress quickly voted the funds back in. Aside from air traﬃc control, there are hundreds, or even thousands of federal taxfunded programs that are necessary to running the US household, including one dear to the steel industry’s heart—infrastructure construction. Bridges, highways, ports, buildings and more across the country are in desperate need of renovation, not to mention all the new bridges, highways, ports and buildings that a growing population will need in the future to drive to their tax-source jobs and transport their GDP-boosting products. Yes, fiscal responsibility is important, but so is providing a foundation for fiscal prosperity. ose served by Republicans are just as deserving as those served by Democrats, so the constant fighting between them is more than disingenuous—it’s destructive to our country’s future. And what sort of future should that be? Hopefully one in which corporate innovation and technology has progressed to the point where we only need to focus on culture and exploration. But in order to get there, we need both halves—Republicans and Democrats—working together, compromising, getting things done, not fighting so loud the neighbors can hear. Because, unlike a marriage between two people, political parties can’t get divorced. SO \

Katie Memmel

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