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Steel SteelOrbis

M. Murat Eryilmaz CEO, SteelOrbis

CEOLetter

Toldyouso

really hate to say that phrase, but sometimes it just fits.

Back in September, I wrote a post on the SteelOrbis blog entitled “US mills just seeking to bully Turkish peers on imports.” One of my main points was the absurdity of US mills accusing Turkish mills of receiving subsidies from the Turkish government, allowing them to oﬀer rebar to the US at incredibly low prices. I reiterated these remarks to some extent along with Namik Ekinci, Chairman of the Turkish Steel Exporters Association, at SteelOrbis’ annual Rebar & Wire Rod conference in January (a full accounting of the event can be found on page 42). Not only are subsidies illegal in Turkey according to the country’s European Union treaty, but Turkish mills do not need them to oﬀer competitively priced rebar to other countries. My opinion was vindicated in late February, when the US Department of Commerce threw out the countervailing duty (subsidy) portion of the trade suit. However, while no one can deny the pleasure of being right, es-

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pecially within the context of such a contested issue, I don’t feel entirely pleased with the outcome, because it has done nothing to change the opinions of US domestic mills that there is no room for imports in the US rebar market (or if there is, certainly not at such attractive price points or ample volumes). Like many other forces and trends outside our control (Twitter is not going away, my friends, so you might as well embrace it), globalization is here to stay, and the world is only going to get more interconnected. We might as well find a way to work together, finding commonalities and opportunities for diﬀerent steel markets to mutually benefit from each other, instead of focusing on areas of disagreement and hanging on tight to the isolationism of the past. In some ways, the US and Turkish rebar markets are already working together, even if it’s not widely acknowledged. For instance, the US doesn’t produce enough rebar to meet domestic consumption demands, and letting imports fill the gap allows US mills to keep capacity utilization under control and prices

relatively high. And of course, Turkey is the largest consumer of US scrap—where would all that scrap go otherwise? ere are many other ways in which the two markets have a sort-of symbiotic relationship, and there is definitely room to build on it. I am certain the Turkish steel industry would like more involvement with the US steel industry, as I am certain the US can find more benefits in stronger ties with Turkey as well. Someone just has to put their hand out first to shake.

With warm regards,

Prime

Contents

Iron ore on the move

Raw materials enrich Brazil

The future of scrap

No “new normal” An unexpected outcome

Aceros Noticias / Eyes wide shut How did Mexican drug cartels get away with illegally exporting iron ore?

Interview / Iron ore on the move Glen Nekvasil, Vice President of the LCA discusses the logistics of the US iron ore market

Interview / No “new normal” Ryan Hoefler, President and CEO of Cobra Trading LLC, discusses his outlook for US scrap

Cover Story / e future of scrap What innovations and developments are waiting for the scrap market in 2014?

News Focus / An unexpected outcome e OCTG trade case ruling squelched US producers’ hopes of returning focus to the US market

Latin American Dispatches / Raw materials enrich Brazil Our Brazilian correspondent describes how iron ore is not the only steelmaking raw material making waves in South America

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Volume 7; Issue 2

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44 Interview / Maintaining stability Antonio Marcegaglia, Chairman and CEO of Italian steel processor Marcegaglia, highlights his company’s strategy for stability with SteelOrbis Brescia

45 Interview / A cornucopia of concerns Li Dayong, general manager of Cangzhou QianCheng Steel Pipe Co, LTD, examines the major concerns facing the Chinese steel industry in 2014 with SteelOrbis Shanghai

46 Interview / From point A to point B SteelOrbis Istanbul discusses steel logistics with A. Rifat Karakimseli, Chairman of the Board, Marti Shipping & Ship Management Co. Inc.

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

Editorial Director Burcak Odabasi

Editor-in-chief Katie Memmel

GM - Americas Brock Watson

Editors Margie Palmer, Michelle Mowad, Raquel Fonseca, 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 18 Bull & Gloom 23 Scrap Networking 26 Light Gauge Stories 30 World Economic Report 38 Interview: Mehmet Zeren 42 Events 48 WSD Strategic Insights 50 Supply Lines 52 Quarterly Results Roundup 57 Fabricator’s Corner 60 Crossword 61 Steel Marvels 63 Price Reports 64 Editor’s Corner

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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 7; Issue 2

SteelNews Alacero: Latin America suffers from surge in indirect steel imports According to a January study issued by the Latin American steel association Alacero analyzing the situation in Latin America in relation to indirect steel trade, namely, the exchange of manufactured steel-containing goods, manufacturing activity for steel-containing goods in the region is concentrated in a few countries and is threatened by massive imports (mainly from China) that arrive—in many cases—under unfair practices and supported by subsidies. Between 2000 and 2010, the share of Chinese steel-containing goods in Latin America’s imports increased from two percent to 20 percent. e study also described Latin America as a net importer of indirect steel trade goods. Between 2000 and 2010, imports increased by 2.3 times, while exports were less dynamic, rising by 1.9 times. In 2010, the trade deficit peaked at $71.2 billion. According to Alacero, the automotive sector accounts for 56 percent of exports of steel-containing goods. Between 2000 and 2012, automotive exports grew at an average annual rate of eight percent and reached a steel equivalent volume of 7.1 million mt at the end of the decade.

Mexico to defend steelmakers from Colombian trade restrictions During the first week in January, Mexican authorities announced that they would defend steelmaker exports from restrictions in the Colombian market. In a document prepared for the World Trade Organization (WTO), the Mexican Ministry of Economy (SE) argued that provisional measures brought against Mexico by Colombia are unsustainable. “In particular we note that the elements contained in the administrative record, far from being an adequate basis for imposing a

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EXTRA, EXTRA...

provisional measure, constitute evidence that the situation within the industry cannot, under any circumstances, justify such a measure.” On October 9, 2013, Colombia imposed provisional safeguard measures against Mexican exports of steel wire rod, by applying a levy of 21.29 percent; 25.6 percent for corrugated steel bars; and 21.96 percent for corrugated wire rod. ese interim measures will expire on April 26, 2014, although final action may establish an earlier date. Safeguards prevent Mexican steel producers such as DeAcero, Ternium Mexico and ArcelorMittal from participating in the Colombian steel market. According to a document prepared by the National Chamber of Industry Iron and Steel (Canacero), the application of these investigations into Mexican steel were conducted by Colombian companies of Brazilian origin such as Acerías Paz del Río (Group Votoramtim) and Diaco (Grupo Gerdau). Vale was Brazil’s top exporter in 2013 In 2013, Brazil-based mining giant Vale’s export value increased by 3.65 percent year on year to $26.50 billion, according to data released by the Brazil’s foreign trade ministry (MDIC). e company was thus the country’s biggest exporter in 2013, accounting for 10.94 percent of the total export revenues. Meanwhile, in December last year, Vale’s export value increased by 9.38 percent year on year to $2.67 billion.

India and Canada to strengthen cooperation in iron and steel industry In mid-January, the India’s Press Information Bureau reported that India’s Steel Ministry and Canada’s Ministry of Natural Resources signed a letter of intent for cooperation in the iron and steel industry. Under the cooperation agreement, both Volume 7; Issue 2

countries plan to develop and expand mutual cooperation, inter alia, through information exchanges in areas of mutual interest including iron ore, coking coal and other steelmaking raw materials and to encourage bilateral investment opportunities in iron and steelrelated business. Eﬀorts made by the two countries will ensure raw material security and forge alliances with global entities for tapping new markets. e representatives from both countries discussed and identified areas of cooperation and assistance where India could benefit from Canada, which is rich in natural resources, especially coking coal. e parties also exchanged views on prospects and growth of the iron and steel industry, as well as on investment opportunities in raw materials, including pelletizing plants and other associated industries in both countries.

DeAcero implores US rebar mills to negotiate, not litigate NAFTA-region trade conflicts On February 13, Mexican steel producer DeAcero released a request that the US Department of Commerce avoid trade disputes with Mexico and focus on the defense of NAFTA regions, which receive unfair imports from China and the European Union. In the document, the company criticized the Mexican steel sector the negative trade balance with the US. “In the last three years, the trade balance between Mexico and the United States in the steel sector reflects a deficit of US$2 billion a year,” the company said. e company said that Nucor Corporation, the largest steel producer in the United States, recently rescinded a $22/mt ($20/nt) rebar price increase, blaming imports from Turkey, Mexico and other countries. But according to DeAcero, the icy weather conditions that have slowed down construction activity in the US are more to blame.

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ArcelorMittal and Canadian mining firm sign iron ore exploration agreement On February 13, Canada-based Evrim Resources Corp. announced it had signed a five-year agreement with ArcelorMittal for iron ore exploration in Mexico. Under the terms of the agreement, Evrim and ArcelorMittal’s Mexican unit ArcelorMittal Servicios Minerometalurgicos de Occidente S.A. will jointly fund the exploration, and in the event of the discovery of a deposit, ArcelorMittal will be solely responsible for funding the mine’s development. ArcelorMittal will own 100 percent of all projects taken to the development stage,

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subject to a sliding scale royalty on iron ore production and a separate royalty on all other commodities payable to Evrim. ArcelorMittal, which already has iron ore mines in Canada, Liberia, Ukraine and Kazakhstan, aims to produce 84 million metric tons of iron ore annually by 2015, up from 15.4 million tons in 2013.

Utah lawmakers debate whether to extend Nucor’s tax exemptions Utah state lawmakers debated in February whether to extend a sales and use tax exemption to Nucor Steel of Plymouth. According to local news reports, although the exemption had a sunset built in for 2029, Rep. Ryan Wilcox, R-North Ogden is promoting new legislation to prevent the exemption from expiring—the bill noted the value of lost revenue from the exemption at $206,000. Rep. Brian King, D-Salt Lake City suggested that extending the exemption can be viewed as “corporate welfare.” “e thing Nucor can’t tell me is if we didn’t have a sales tax exemption would we have seen the growth?” he said. Nucor Corp. reported stellar quarterly results last month. However, Rep. Wilcox suggested that if any company deserved a tax break it was Nucor. “We’re talking about 1,000 jobs in Utah,” he said. “is is a recycling company, the largest one we have. Frankly if we are going to give an incentive this is it.” e sales tax exemption applies to inputs at the plant, but company oﬃcials maintain there is tax revenue generated down the line.

seamless steel pipe, not including mechanical or stainless pipe, with a nominal external diameter equal to or greater than 2” (60.3 mm) and less than or equal to 4” (114.3 mm), irrespective of the wall thickness, coating or steel grade that is manufactured. e investigation period was from April 1, 2011 to March 31, 2012 and the comparison period of analysis of injury and causation to the domestic industry was from January 1, 2009 to March 31 2012. During the comparison period, the agency recorded an increase in import tonnages of 94 percent, with an increase of 33 percent during the period of investigation. Meanwhile, prices increased by 19 percent during the comparison period and 19 percent during the period of investigation. e SE noted that because of these competitive conditions, the Mexican domestic industry was forced to decrease its own prices. erefore, the agency applied a specific final antidumping duty equal to the difference between the normal value and the export price used to calculate the margin of price discrimination, at US$1,568.92 per SO \ metric ton.

Mexico levies steep antidumping duty against Chinese seamless pipe Also in January, the Mexican Secretary of Economy (SE) published the final determination of the antidumping investigation on imports of Chinese seamless steel pipe. In the Oﬃcial Gazette (DOF), the agency said that based on the results of its analysis, there is suﬃcient evidence to show that these imports were made at a discriminatory price and caused injury to the domestic industry in terms of the provisions of Article 3 of the AD Agreement 41 Foreign Trade Law (LCE) and 64 of its rules. e product under investigation was Volume 7; Issue 2

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Steel News

“Trade disputes between members of NAFTA should be resolved through negotiation and agreement rather than trade litigation.” Previously, meetings between the trade ministers of Mexico and the US showed a commitment from both countries to boost the regional supply chain and strengthen commercial ties. e company stressed that the main objective is to solve this conflict to focus on imports from outside the NAFTA region. “ese represent the real problem, especially considering China and excess steel capacity in Europe,” said the report. DeAcero noted that 20 years after signing NAFTA, it is necessary to evaluate how to resolve disputes between members of the agreement to reach solutions that have little or no impact on supply chains in the region. “A suspension agreement in the antidumping case for rebar would ensure a reasonable source of supply in a market where US producers account for 90 percent of consumption, and ensuring adequate competition is important to avoid non-competitive markets.” DeAcero noted that Mexico has been consistent with its exports to the United States with 250,000 tons per year in the last five years to maintain a constant market share. “When this figure is compared with 90 percent of the market share that the US rebar industry has, it seems irrational to claim that Mexico exports are threatening or causing any damage to the domestic industry.”

MarketAnalysis

A long, bumpywinter RAWMATERIALS

Harsh weather hampers US scrap market During the middle part of January, 90 percent of the US was hammered by record freezing temperatures brought on by Arctic blast, which nearly stalled domestic scrap collection eﬀorts and led to thin dealer inventories. By then, East Coast prices had firmed by approximately $15/lt from levels seen in December, and although dealer sources said the East Coast market was strong, warmer weather by the end of the month had started to open up collection efforts and it was believed those price points would not hold. Meanwhile, prices within the Ohio Valley firmed by approximately $10/lt, bringing the most commonly reported transaction ranges to $395-$405/lt and $425-$435/lt, respectively. Busheling scrap was more readily available during the first part of the month, and prices within the Pittsburgh/Cleveland area held steady at $430-$440/lt. ere was also a lot of speculation about the direction of US domestic scrap prices for February buys. Toward the end of January it was believed that prices in the Philadelphia region could decrease by $15-$20/lt, while

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prices in the Pittsburgh/Cleveland area could decline by as much as $20-$30/lt. Although a brief stint of warmer weather had opened up collection eﬀorts and scrap flow into the yards, the weather then took another turn for the worse; supply once again tightened and dealer sources throughout the East Coast and Ohio Valley are split on how February market prices will unfold. e question of whether US domestic scrap prices would falter and if so, by how much, was answered by the middle of the month. While Philadelphia-area asking prices for HMS I/II held steady at $355$365/lt, prices for shredded scrap and busheling scrap came down by approximately $35/lt and were in the approximate respective ranges of $370-$375/lt and $390$395/lt. Dealer sources said that East Coast exporters who had been unsuccessful in obtaining oﬀshore bookings for shredded scrap had started to turn their shipments inland, which contributed to price softening. February prices in the Ohio Valley/ Pittsburgh/Cleveland area also declined from the beginning of the month. Prices for shredded scrap softened by approximately $13/lt putting the new range at approximately $413-

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$417/lt. Dealer sources said scrap dealers in Houston were also having a hard time obtaining oﬀshore bookings, and they had started to cold call Midwest mills in hopes of booking orders. By the end of the month, shredded scrap prices in the Ohio Valley, Pittsburgh/Cleveland area settled down approximately $21/lt from levels seen in late January, and many speculated prices had not yet reached their bottom. As of late February, shredded scrap prices were seen at approximately $405/lt, while busheling was being sold at about $421/lt. e biggest outlier, according to brokers, was the fact that there were a lot of open orders out of Philadelphia, Chicago and other regions that had not yet been fulfilled; and the speculation was that March buys could be down anywhere from $10$20/lt. Meanwhile, prices in the Philadelphia area had, for the most part, held steady. East coast scrap dealers continued to report that export yards were flooding the domestic market with shredded scrap, and that scrap flow continued to be hampered by winter weather conditions.

Buying activity ramps up in Chinese scrap market During the week ending February 18, the domestic steel scrap market in China trended sideways following the downward movement registered in the previous week, while transaction activity gradually increased. In the given week, the trading volume in the local Chinese scrap market increased as traders resumed their sales activities and as mills started purchasing. On the other hand, during the week ending February 27, prices of imported iron ore in China trended down from the previous week, while traders in Tangshan and Liaoning kept their prices of domestic production iron ore stable week on week. ere was not any improvement in transaction activity in the given week. In the

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Turkish scrap market cautious about trend In late February, scrap suppliers in the Black Sea region started to test new levels for Turkey. Market sources told SteelOrbis that Turkish steelmakers had been delaying their scrap purchases from the Black Sea for a while as deep sea scrap offer prices continued to decline, with deep sea HMS I/II 80:20 scrap offers having decreased by $20/mt over the last two weeks of February to attractive levels of $340-$350/mt CFR. In addition, higher freight costs had prevented significant downticks in Black Sea offer prices, pushing Turkish buyers to focus on deep sea scrap purchases. Toward the ending days of February, there was one main question on business players’ minds in Turkish scrap market: “Have import scrap prices in Turkey hit bottom?” As of February 25, import scrap prices in Turkey had been trending downward for weeks, with prices declining by $25/mt and causing Turkish steelmakers to accelerate their purchases. e latest ex-US HMS I/II 80:20 scrap deal, as of the end of the month,

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was concluded at $348/mt CFR, with the transaction price level indicating a decrease of $10/mt on weekly basis. Scrap suppliers stated that scrap prices reached bottom levels and that from that point activity would likely slow down and prices would follow a sideways trend, especially since most transactions in the last two weeks of February were concluded from the US and inventory levels in the country had eroded substantially. us, US scrap suppliers started to reject prices below the levels of $348-$350/mt CFR for HMS I/II 80:20 scrap. Turkish steel mills, in the meantime, reported that scrap demand in Turkey did not soften yet and new import scrap purchases could be expected to be concluded, most likely from Europe. Having remained quiet in the previous week in terms of import scrap transactions, the Turkish market also made a quiet start to the first week of March. Having accelerated their scrap purchases following declines of $25/mt in import scrap prices towards midFebruary, Turkish mills were not in a hurry to conclude new deals. Although the general consensus in the market was that scrap prices in the local US market did not see bottom levels yet as of March 4 and that prices for March buying might decline by $10$20/mt, market sources did not believe this domestic decline would be reflected in export offers. Availability of ex-US scrap offers in the market were not on the plentiful side as most US scrap suppliers’ inventories were almost empty, giving the advantage to suppliers. Before March 4, in the last week of February, no ex-US scrap deal was concluded in Turkey, but then an ex-US HMS I/II 80:20 scrap booking was concluded at $348/mt CFR. Meanwhile, the latest exBaltic scrap deal was concluded in Turkey at $355/mt CFR for 23,000 mt of HMS I/II 80:20, 3,000 mt of shredded scrap and 4,000 mt of bonus grade scrap. As of March 4, the scrap offers from Europe to Turkey stood in the range of $335-$340/mt CFR. According to market sources, in the first week of March, ex-Black Sea A3 scrap offers to Turkey stood in the range of $340$345/mt CFR Marmara. e latest ex-Montenegro scrap deal in Turkey was concluded at $350/mt CFR for 2,500 mt of HMS I/II 80:20 and at $360/mt for 500 mt of bonus Volume 7; Issue 2

grade scrap. Turkish steelmakers started to focus on scrap purchases in line with their needs from short sea sources and the Baltic region, following the decreased number of ex-US scrap oﬀers to Turkey amid the low inventory levels of US scrap suppliers. Meanwhile, due to the ongoing political tension in Ukraine, Turkish mills were cautious about concluding deals from the country and were inclined instead to conclude bookings from the Baltic region at the moment. Also, according to the price report that was posted on the SteelOrbis website on March 7, SteelOrbis learned from market sources that in Turkey’s Aliaga region—the only region in Turkey where ship scrapping is allowed—ship scrap prices were ranging at $355-$360/mt ex-yard, indicating an increase of $5/mt over the previous week.

LONGPRODUCTS

US rebar market holds the line against import and scrap pressure In a break from the “small bites” price increase philosophy defining the US domestic rebar market in Q4 2013, Gerdau Long Steel North America announced a $1.50 cwt. ($30/nt or $33/mt) immediate price boost in mid-January, although the market reacted skeptically in the short-term. Sources told SteelOrbis that buyers were holding oﬀ on purchases until Nucor oﬃcially reacted, especially since the current consensus was that Nucor would only raise prices by $1.00 cwt. ($20/nt or $22/mt)—sticking to the established balanced approach for increases. Until then, US domestic rebar spot prices remained in the range of $33.50-$34.50 cwt. ($670-$690/nt or $739-$760/mt) ex-mill. As it turned out, those in the US rebar market who chose to wait out Gerdau Long Steel North America’s price increase last week chose wisely—within days, Nucor responded with a more moderate $1.00 cwt. ($20/nt or $22/mt) increase, causing Gerdau to rescind its original announcement and follow Nucor’s lead. Now that the price direction was settled, spot prices for US domestic rebar moved up to the range of $34.50-$35.50 cwt. ($690-$710/nt or $750-$782/mt) exmill. Steady demand for rebar in the US supported the moderate price firming, but

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MarketAnalysis

week ending February 27 Indian fine ores of 63.5 percent grade were oﬀered at $134/mt at Qingdao port. Meanwhile, quotations of 66 percent iron ore concentrate in Tangshan stood at $135.60/mt, and prices of the same material were at $111.10/mt in Beipiao, both excluding VAT. During the week ending March 4, prices in the main steel scrap markets in China followed diverse trends, while the overall average price in the domestic market indicated a very slight downtick week on week. Transaction activity in the market slowed down compared to the previous week. Steel scrap prices in many areas of China moved sideways in the week ending March 4, while scrap prices in the northern and central regions of the country indicated minor decreases. Meanwhile, some steel mills in Jiangsu Province raised their scrap purchase prices slightly due to insuﬃcient arrivals of scrap, but this failed to impact the price trend in the overall market. At the same time, the ongoing rainy weather in most regions of China caused a slowdown in transaction activity in the Chinese scrap market.

MarketAnalysis

uptrending scrap also helped even though US mills “officially” divorced their monthly price changes from raw material movements. erefore, when and if scrap prices neutralized or dipped downward once warmer weather increased availability, sources believed that rebar price increase absorption might not be as easy as it had been in the previous few months. However, wariness about imports was also a factor in the ongoing US domestic rebar uptrend, and the outcome of the trade case against Turkey and Mexico would undoubtedly have an impact, especially if Turkey remained determined to offer attractive deals to the US. Near the end of February, Turkish mills dropped their offers on the CFR level to traders, although sales prices in the US were not immediately affected. Predictions at the time stated that shredded scrap prices would move slightly down (some pointed to a sideways trend, but they were in the minority), but even if scrap dropped by up to $20/lt, sources told SteelOrbis that rebar mills would respond by simply keeping prices stable—after all the gains in the last few months, mills were unwilling to budge from current levels. However, they hinted that they might be amenable to special deals for larger customers, but any discounts would be minimal. As February progressed, soft scrap prices and uncertainty regarding the trade case stagnated US domestic rebar spot prices in the range of $33.50-$34.50 cwt. ex-mill. While US mills reportedly held onto hope that the US Department of Commerce would slap heavy margins on Turkish and Mexican rebar mills, many others believed any duties levied would be minimal at most, leaving the door open to competitively-priced imports in the US market. Bolstered by a late-February ruling by the US DOC that effectively tossed out the countervailing duty portion of the rebar trade case against Turkey, Turkish mills became more aggressive with prices to the US, dropping CFR offers by about $15/mt. However, traders told SteelOrbis that the price drop had not entirely made its way into import sales prices in the US, primarily because US buyers expected offers to drop even

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further. However, if someone didn’t want to take the gamble and opted to book, new offers would likely be around $30.00 cwt. ($600/nt or $661/mt) DDP loaded truck in US Gulf ports or less. Even though the window of opportunity passed for import rebar orders to arrive in the US before the April trade case ruling, Turkish rebar mills still aggressively courted US traders for May arrivals. As for the US domestic rebar market, prices continued their stable trend in March, as Gerdau Long Steel North America issued a letter to customers early in the month stating that they would keep rebar prices (along with merchant bar and beams) oﬃcially unchanged.

Mexican rebar prices plunge throughout Q1 Mexican domestic rebar prices dropped $8/mt in mid-January to reach $683/mt exmill. Although the economic outlook started to improve in Mexico, sources warned that the recently passed tax reform would impact investment decisions in Mexico, as the disposable income of households and firms would be diminished. Additionally, construction investment was forecasted to remain weak because the recession had continued in the sector and recent data showed that gross fixed investment and construction spending declined in Q4 2013. Two weeks later, Mexican rebar prices Volume 7; Issue 2

plunged by $53/mt to reach US$630/mt ex mill. Despite pessimistic predictions for the construction industry, rebar producers still expected purchases for short-term projects such as the construction of the second level of the Mexico-Toluca highway. Another obstacle to the Mexican rebar market in January was the continuation of South American countries implementing safeguards to protect them from rebar dumping from countries like China, India, and Mexico. Mexican rebar prices continued to drop throughout February, decreasing by $20/mt to reach $610/mt ex-mill. Internally, the lack of rebar-demanding projects blunted any efforts to lift the price trend. Rebar export market gains strength in Turkey According to the report that was posted on SteelOrbis on February 28, Turkey’s rebar export offers remained stable since the previous week at $560-$570/mt FOB on actual weight basis, but demand on the export side failed to improve over the period. Turkish rebar offers to the UAE indicated a decline of $10/mt on a weekly basis, decreasing to levels of $560-$565/mt CFR on a theoretical weight basis. Meanwhile, Turkish rebar offers to Egypt were at $580/mt CIF on actual weight basis ($560-$565/mt FOB), though Egyptian buyers were asking for discounts of $10/mt on these levels.

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the export side might conclude bookings at the $550/mt FOB mark. On wire rod side, market sources reported that Turkish wire rod export offers as of February 28 showed no changes from the previous week at $570-$585/mt FOB. Demand on the export side was at better levels as compared to local the market, while inquiries and demand were mostly coming from the US, Middle Eastern and North African markets. Demand for Turkish wire rod in the US market strengthened following the announcement of the US Department of Commerce regarding the initiation of an antidumping and countervailing duty investigation on imports of wire rod from China. Some Turkish producers already concluded deals in the US wire rod market, with their latest offers, levels standing at $605$625/mt CFR for mesh quality wire rod and at $620-$640/mt CFR for drawing quality wire rod as of February 28. Activity quiet overall in Italian rebar market Domestic rebar prices decreased again in Italy in the last week of February. Compared to the previous week, Italian producers’ rebar prices for their domestic market declined by €10/mt ($14/mt) to €450/mt ($630/mt) exworks. According to sources interviewed by SteelOrbis, customers in the market had the feeling that the bottom might have been reached. For this reason, local rebar prices might have stopped declining and there could be a small improvement in buying activity in the coming short period. Howewer, as of February 28, activity in the Italian rebar market was still very quiet. e situation was not very different on the export side, where foreign buyers were still very cautious about concluding transactions. Italian producers were offering rebar at around €445/mt ($623/mt) FOB, while sources excluded the possibility of price decreases in the coming short period. Downward pressure softens Chinese long product prices During the week ending February 24, rebar and wire rod prices in the Chinese domestic market maintained their downward Volume 7; Issue 2

trend, while overall transaction activity was slack. On February 24, rebar futures contract (1405) oﬀers closed at RMB 3,384/mt ($556/mt) at Shanghai Futures Exchange, decreasing by $12/mt as compared to the previous week. In the given week, inventories of rebar and wire rod in the Chinese domestic market continued to rise as sales volumes did not indicate any improvement. Accordingly, the downward pressure on market prices increased. Meanwhile, the softness in the steel futures market and the downtrends in the coke and iron ore markets negatively aﬀected the finished steel markets in China. (€1 = $1.40)

FLATROLLED

US flats prices see long, slow downtrend throughout Q1 In the first week of January, US domestic flat rolled prices saw an increase following a late-December price hike announcement. At that point, HRC spot prices upped $1.00 cwt. ($22/mt or $20/nt) ex-mill and CRC spot prices increased $0.50 cwt. ($11/mt or $10/nt) ex-mill although sources wondered how much of that would stick beyond a few weeks. e most commonly reported spot price range was at $34.00-$35.00 cwt. ($750-$770/mt or $680-$670/nt) ex-mill for HRC and approximately $38.50-$39.50 cwt. ($849-$871/mt or $770-$790/nt) exmill for CRC. But a week later, HRC prices started to dip. HRC oﬀers softened to the range of $33.50-$35.00 cwt. ($739-$772/mt or $670-$700/nt) ex-mill while CRC prices held steady in the general range of $38.50$39.50 cwt. ($849-$871/mt or $770$790/nt) ex-mill. Sources said that at that point, it was too soon to judge the overall health of the flats market—inclement weather in most of the US slowed business activity with buyers and mills. At the end of the month that landscape became clearer, as HRC prices seemed to stabilize following two weeks of modest decreases. At that point, US domestic HRC leveled out to the general range of $33.00$34.50 cwt. ($728-$761/mt or $660$690/nt) ex-mill. US domestic CRC fared better and re-

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A Turkish steelmaker sold rebar to Israel in the week ending February 28 at $585/mt CFR on actual weight basis. In addition, some rebar deals were concluded from Turkey to North Africa at $560-$570/mt FOB on actual weight basis, though for small volumes. However, Turkish mills were having difficulties competing in the region because of Chinese suppliers, as Chinese rebar offers to North Africa were at $507/mt FOB on actual weight basis. Market sources indicated that the decline in import scrap prices bottomed out in the last week of February and that scrap buying activity in Turkey might slow down in the first few following weeks. Meanwhile, despite low demand on the export side, Turkish mills would be expected to seek to keep their prices stable on the back of support from stable raw material prices. In the week ending March 7, according to market insiders, Turkey’s rebar export offers softened by $5/mt on the high end over the previous week to $555-$565/mt FOB on actual weight basis. Activity for Turkish rebar on the export side indicated improvement over the same period, while some ex-Turkey rebar deals were concluded in the Middle East and North Africa. Accordingly, an ex-Turkey booking for about 10,000-15,000 mt of rebar was concluded in Yemen at $575/mt CFR ($555/mt FOB) on theoretical weight basis, whereas deals from Turkey’s Iskenderun region to Egypt for approximately 30,000 mt of rebar in total were concluded at $573-$575/mt CFR ($560/mt FOB) on actual weight basis. In the meantime, March shipment sales for ex-Turkey rebar were completed in the UAE market at $565-$570/mt CFR on theoretical weight basis. Ex-Turkey rebar sales improved in the past week before the week ending March 7, showing that the offers gained acceptance by foreign buyers. Although import scrap prices weakened by $50/mt since January, Turkish finished steel offers only declined by $25/mt over the same period. In the meantime, due to the political tension in Turkey, buyers on the export side were relatively cautious as regards concluding deals from Turkey. Sources also stated that actual buyers on

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mained steady in the general range of $38.50-$39.50 cwt. ($849-$871/mt or $770-$790/nt) ex-mill. Sources said mills continued to ask for higher prices, but were not successful in getting them. In the first part of February, HRC prices were stable but sources expected to see some softening due to price degradation in the US domestic scrap market. Some believed that HRC oﬀer prices could drop by as much as $1.50 cwt, but many were waiting to see where the scrap market bottomed out before making final predictions. CRC prices were stable, but some questioned how long that trend would last, especially if HRC was slated to tick down. A sideways pricing trend held through the middle of the month, as cold weather froze buying activity across most of North America. Sources, however, predicted a decrease was on the horizon and believed still-falling scrap prices could bring HRC and CRC prices down by as much as $1.00 cwt. ($22/mt or $20/nt). at prediction turned out to have some legs. CRC prices also dipped by about $1.00 cwt. ($22/mt or $20/nt) toward the end of the month, bring the most commonly reported transaction range to $37.00-$38.00 cwt. ($816-$838/mt or $740-$760/nt) exmill. HRC, however, toppled by approximately $2.50 cwt. or ($55/mt or $50/nt) since the start of the month and it was expected these levels would continue to tick down in the

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weeks to come. Oﬃcial ex-mill asking prices were in the general range of $30.50-$31.50 cwt. ($672-$694/mt or $610-$630/nt), and oﬀers were expected to dip below $30.00 cwt. in the next 60 days. One week later, CRC prices dipped by another $0.50 cwt. ($11/mt or $10/nt) from last week to the general range of $36.50$37.50 cwt. ($805-$827/mt or $730$750/nt) ex-Midwest mill. Falling scrap prices continued to be the primary culprit, according to sources, who said they didn’t think the flats market would bottom out until raw material costs began to stabilize. Mexican flats prices decline despite mill attempts at uptrend In mid-January, Mexican domestic hot rolled coil (HRC) prices declined by $7/mt to settle at US$746/mt ex-mill. Demand from the automotive sector remained strong, despite the price dip, as Mexico earned a new rank as first as a supplier of auto parts, trucks and buses to the US market, and fourth as a supplier of cars to the US, behind Canada, Japan and Germany. In fact, according to sources, Mexico increased its production capacity of cars to the North American region to 19 percent from 5 percent 20 years ago. Meanwhile, Mexican domestic cold rolled coil (CRC) prices increased moderately around the same time, moving up $13/mt from early January levels to reach $882/mt. By late January, the trend for flats prices

Volume 7; Issue 2

in Mexico turned around, and HRC prices fell by $4/mt, despite the bullish outlook demand. e small downward variation was linked to the behavior of international prices, especially those in the NAFTA region. However, domestic producers betted on the performance of the US economy and particularly its automotive market to boost growth in production and demand levels. For example, Altos Hornos de México (AHMSA) achieved a record growth in productivity of 7 percent in 2013 compared to the same period in 2012. e bulk of the increase was attributed to steel production for construction, metalworking, automotive, white goods and the oil industry, mainly hot and cold rolled sheets, tin plate and structural shapes, and plate in sheet and roll. For the domestic automotive sector, the growth of the automotive market in the United States was also projected to be a growth factor for the Mexican industry; one source explained that “if a growth of 7 percent recurs this year, it would represent and additional 1 million units sold in that market.” Similar to the HRC trend, CRC prices slipped in late January, decreasing by $14/mt. e trend was especially frustrating considering that domestic steel producers announced earlier in the month a 5 percent increase on certain flat products such as steel plate, and the uptrend was expected to spread to other flats markets. However, domestic buyers did not accept the trend, and attempts by mills to raise prices were shut down before they could announce anything oﬃcial. Flats prices in Mexico continued to drop in February, with HRC prices coming down $12/mt to $730/mt and CRC prices decreasing by $24/mt to $844/mt. While there had been large investments announced by Mexican flat steel mills, increased competition among service centers that are being installed in industrial corridors did not allow mills’ attempts to increase of prices to spread into the local market. “Domestic steel companies are not able to supply special steels required for the automotive or appliance sectors, nor technology, nor cost, nor capacity,” said one automotive

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Political strife in Ukraine destabilizes flats market In late February, the domestic Ukrainian flat steel market was indicating an unstable trend due to the extremely tense political situation in the country and the ongoing depreciation of the national currency (UAN) against the US dollar. us, local flat steel prices were changing almost every day. Hot dip galvanized (HDG) coil and prepainted galvanized iron (PPGI) prices in the local market continued to increase because of weakening of the domestic currency against the dollar and amid more expensive import steel products which were used by local mills as feedstock for their HDG and PPGI production. erefore, higher production costs were reflected in domestic mills’ offers, with their prices moving up by $20-$50/mt for HDG and PPGI. Local producers were keeping a close eye on overseas offers, especially from China, which traditionally offers material to Ukraine at lower prices. Accordingly, offers from China to Ukraine were at $1,0601,080/mt CIF Odessa for 0.45 mm 100 gr/m² zinc-coated PPGI and at $940$960/mt CIF Odessa for 0.45 mm 100 gr/m² zinc-coated HDG.

Chinese flats market fails to pick up after holiday In China, during the week ending February 19, the Chinese domestic cold rolled coil

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(CRC) market moved on a soft trend. Transaction activity in the local Chinese CRC market remained poor. Oversupply continued to be an issue due to the high capacity utilization rates of domestic mills. Inventory increased rapidly after the Chinese New Year holiday and was at a record-high level for the time of the year as of mid-February. Many traders reduced their CRC prices in order to attract business and bring in funds. During the week ending February 18, Chinese domestic hot rolled coil (HRC) prices had on average moved on a slight downtrend. Overall transaction activity in China’s domestic HRC market remained at low levels. Cautious sentiment prevailed in the market, while demand from downstream users did not indicate any significant improvement. Despite the upward trend in the steel futures market, traders generally either kept their prices unchanged or reduced them slightly in order to attract business and bring in funds.

Turkish flats mills face downward pressure in February Demand in the domestic Turkish hot rolled coil (HRC) market was still on the weak side in mid-February. Market sources stated that the HRC oﬀers of local mills and traders were almost at the same levels for about two months, causing profit margins to decrease significantly. Trading activity slowed further due to the tighter profit margins. On the other hand, domestic mills were resisting the downward pressure on their prices and maintained their HRC prices at $580-$600/mt ex-work since the previous week. However, buyers continued to postpone purchases and were concluding deals only in line with their needs because many thought there would be a reduction in mills’ oﬀer prices. Demand in the local Turkish hot rolled coil (HRC) market was quite poor, due to higher inventory levels and fluctuations in the dollar/Turkish lira rate amid political tensions in the country in late February, while spot prices remained stable as of February 25 on weekly basis, but it was expected that price levels might experience softening in the near future because of the mentioned factors. Volume 7; Issue 2

Meanwhile, local buyers started to put pressure on traders to conclude deals on Turkish lira basis, but traders refused and instead preferred to conclude sales for advance payments in order to avoid any problems in collecting payments, and this caused a slowdown in market activity. On the other hand, domestic mills were unable to maintain their long-standing resistance to pressure on their prices, with their prices declining by $10/mt on weekly basis as of February 25 to $570$590/mt ex-works. In the first week of March, market sources stated that demand for Turkish flat steel export oﬀers was still slack. Demand for Turkish flat steel in the targeted export destinations failed to record the expected recovery so far in 2014, and sources stated that current demand was even lower than the levels seen in the first two months of 2013. Turkey’s export oﬀers for March production hot rolled coil (HRC) and cold rolled coil (CRC) remained stable on weekly basis at $560-$570/mt FOB and at $670-$680/mt FOB, respectively.

Indian flats market gears up for price hike Buyers remained cautious in local Indian HRC market as of ending days February. Local Indian hot rolled coil (HRC) prices remained in the range of INR 41,00041,500/mt ($657-$664/mt) ex-works, as buyers remained cautious about concluding fresh bookings, while steel mills were reported to be considering a fresh increase in base prices next month. According to a Mumbai-based trader, sentiment in the market was weak and distributors were not willing to carry large inventories at high base prices, while at the same time no discounts were reported either from steel mills or traders. e trader went on to say that HRC prices were expected to move in a very narrow range as demand continued to be tepid and mills were unlikely to take demand into account and adjusted their prices accordingly in order to boost activity. On the contrary, market sources said that several steel mills were already laying the groundwork to announce a price hike in March, the third since the beginning of the year, citing shortages and rising prices of iron ore. SO \

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industry source, adding that the arrival of new auto companies and the promise of new energy projects will trigger growth of up to 10 percent for some service centers and steel distributors that have a greater presence in the country. Flat steel consumer sectors also faced additional challenges; auto industry representatives expressed concerns about the current law against money laundering, which prohibits businesses—even car dealers—from receiving more than $217,000 pesos (US$16,699) in cash. However, people in rural areas usually make payments in cash and checks, and if they’re ability to use cash is limited, they often prefer to go to the United States to buy cars and trucks rather than purchase them in Mexico.

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Eyeswideshut

SteelOrbis Americas’ Mexican correspondent discusses how a drug cartel illegally exploited iron ore mines for so long without any authorities noticing.

n early November 2013, the Mexican lems. firm ArcelorMittal (who stayed with Sicartsa) federal government took over and mili“Most of the groups that are engaged in and Ternium (Italian-Argentine consortium tarized the industrial port of Lázaro Car- mining belong to the Knights Templar. ey that was left with Hylsa), along with Minera denas, Michoacán, as a response to the have the whole chain,” said a local official del Norte (subsidiary of Grupo Acerero del increasing illicit export activity of Norte, owned by AHMSA), and the Mexican drug cartel known as also transnational firm Pacific the Knights Templar and the conCoast Minerals (USA) and Ennivance of port authorities. In fact, deauvour Silver (Canada). It is unat that time Governor Fausto clear how the iron ore produced Vallejo said the cartel was mercifrom these mines ended up in the lessly exploiting mining. hands of the Knights Templar, in Time passed and no one full view of the alleged authorities stopped the burgeoning export ac(federal and state governments retivity of the Knights Templar. In sponsible for the treasury, customs fact, the critical local media reand ports, military and maritime ported in January that “in a small activities). town hidden by mountain roads, Business remained buoyant, an hour from Lázaro Cárdenas, substantially increasing the export the cartel provided hundreds of of iron ore to China (4 million tons trucks to carry iron ore to the from January to October 2013), port.” because no one lifted a hand to e town, called Arteaga, is the stop this massive illegal activity, birthplace of Servando Gómez, La until a powerful federal commisTuta (head) of the Knights Temsioner, Alfredo Castillo, began to plar cartel. Trucks moved quickly advocate for the safety of Mithrough the iron mines of Michoacán. Surrounded by media, choacán to meet Chinese demand, Castillo announced on March 3 which contributed to increasing that state and federal authorities mineral exports to 4 million tons seized in the port area of Lázaro by October from 1 to 1.5 million Cárdenas 119,000 tons of iron ore tons in previous years. and 124 heavy machines from According to testimony from abroad that are used to process and local officials, miners and busitransport minerals, plus nine stornessmen, the business is based on age yards that are not established several pillars: first, the Knights legal residences in the country. e Templar controls the iron ore investigations showed that the stormovement. After becoming the age yards were being used to store dominant group in the city some a large amount of material that The Mexican military took over the Port of Lazaro Caryears ago, the cartel demanded were likely intended for illegal denas after allegations of illegal iron ore exporting. payments from local transportation sources, with no permits or docucooperatives in exchange for promentation to support extraction, tection. ey also helped to appropriate min- who asked not to be identified. Powered by storage and export. ing areas that had not been claimed by the appetite of buyers in China, almost half However, over 5 million tons of iron ore others, or that were beyond the control of the of the mining activity in the area was con- has allegedly already been exported to China, owners of concessions. After that, they de- ducted without proper permits in 2013.” and the 119,000 tons only represents a fracmanded their share. Finally, the cartel presMichoacán provides 25 percent of iron tion of that. Critics of Mexican justice said sured customs officials to ensure that the iron ore in the country and the largest producers it is outrageous that so much illegal trade ore passed through the port without prob- of iron ore in the state are the transnational could have happened without anyone noti-

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Volume 7; Issue 2

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Mexico’s drug cartels are the Mafia 2.0.

Rodrigo Canales

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AcerosNoticias

ing where the boom in exports was coming from. Two days after this announcement, the president of the National Chamber of Industry Iron and Steel (Canacero), Alonso Ancira, estimated that losses from theft of iron ore carried out by organized crime amounted to US$1 billion in 2013. According to industry spokesmen, organized crime gangs work in cooperation with Chinese nationals who have moved to Michoacan for that purpose. “Ten million tons were exported at U$100/ton. e US$1 billion total is all laundered money,” Ancira said, adding that criminal gangs force mining companies with legal permits to exploit major fields to grant them portions of the land. “ey say, ‘Get out, take out your machinery, we’re working here’,” Ancira was quoted as saying in Mexican media the first week of March. “If the owner even gets close to the site, they say, ‘Get out, because if you don’t you’re going to go see Our Lady of Guadalupe, and not exactly at the basilica’.” Ongoing investigations show evidence that organized crime charged owners of extraction facilities “between US$4-$7 dollars” per ton of iron ore they extracted, according to Castillo. “Additionally, organized crime gangs charged additional amounts for transportation, storage, processing, legalization and export,” he said. Beyond preventive load seizures, the authorities are taking measures such as reviewing mining permits and even evaluating loads to see whether they actually hail from the mines they are supposed to hail from. Mexico’s gangs are active in drug traﬃcking, in the illegal trade of raw materials, in extortion and in product piracy, among other activities, and they often re-invest their profits in legal businesses. It is important to see the cartels as businesses, so that one can understand them, says Yale University economist Rodrigo Canales. Just like large multinationals, they are constantly looking for new markets and business opportunities, and they invest in innovation and human resources. Gangs like Los Zetas operate an outright franchise business, Canales said in a recent lecture.

In fact, Mexican cartels are really criminal logistics firms, according to a recent article published in the magazine Foreign Policy. eir activities are not so much based on one product but on the fact that they control transport routes.In this respect, they are similar to Amazon, which started out selling books online and now sells all sorts of products through its global network. Mexico’s drug cartels are the Mafia 2.0. So delicate is the situation, that companies such as Ternium had to go out to disprove prestigious local media: “e Aquila mine is the only operation that Ternium has in the state of Michoacan and it is operating normally with all environmental and legal permits. Iron ore is hauled from the mine as Aquila-controlled Ternium-owned facilities for subsequent steelmaking. Ternium confirms that it has neither purchased nor obtained iron ore from Michoacán (except for its mine Aquila), and rejects any statement disputing that it has all the necessary documentation. Ternium operates with all permits in all its mining facilities.” e news referred to the saying that “alleged criminals exploiting Michoacan would update some 3,200 tons of iron ore in the municipality of Aquila, Michoacán, transferring 50 percent of miners yards Manzanillo, Colima, and then illegally exporting iron ore to China. Sources consulted by media firm Grupo Reforma alleged that Ternium purchased illegally-obtained iron ore in order to save costs in the extraction process and prevent recruitment. According to data collected, the negotiations on the ferrous material is traﬃcked from Michoacán to Colima, and would be carried out in the Starbucks of Colima port, located on the boulevard Miguel de la Madrid Hurtado. Quite a conspicuous place to conduct such blatantly illegal business—but then again, hardly anything about this has been inconspicuous. “It’s very diﬃcult to sweep under the rug 119,000 tons of iron ore, which is not obtained by digging with fingernails, nor does that volume occur within minutes,” said a Michoacán-based source close to the steel industry. “Transfers from mines to ports is done in the open with closed eyes. Similarly, it is impossible to hide US$2 billion in the cupboard or save heavy machinery in the canary cage. Trying would be absurd ... but not in Michoacán.” SO \ Volume 7; Issue 2

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Maintaining stability

Antonio Marcegaglia, Chairman and CEO of Italian steel processor Marcegaglia, highlights his company’s strategy for stability with SteelOrbis Brescia.

arcegaglia is a leading industrial group worldwide in the steel processing sector, with a yearly output of 5 million tons. e group has operations worldwide with 7,500 employees, 52 sales oﬃces, 210 representations and 43 manufacturing plants covering 6 million square meters, where 5,500 kilometers of carbon and stainless steel products are manufactured every day, serving more than 15,000 customers. Antonio Marcegaglia was appointed as Chairman of Marcegaglia in October 2013. He has served as President of major international steel associations and institutions, being regularly involved at summits. In addition to being a board member of listed companies such as Lavazza and Gabetti Property Solutions, Marcegaglia also promoted the creation of the Marcegaglia Foundation, a non‐profit organization, with a focus on social solidarity in Italy and in the poorest areas of the world. What is the core business of Marcegaglia and what are its major markets? AM: Our core business is the processing of steel. I’ll exclude from the core business those activities related to building products, metal products for household, the tourist-real estate business and other activities. Such activities account for about 8 percent of our turnover. When I say we process steel, I mean that we are not primary iron and steel producers, as we don’t cast steel . We consider part of our core business our entire range of products, ranging from flat steel to tubes, stainless steel, cold-drawn bars etc. We have a strategic positioning which is rather unique and peculiar and we actually deal with competitors, markets and logics that are similar but also diﬀerent from one product line to another. Speaking about our industrial segments, the richness in product range is the supporting model of our group’s business. Our target sectors are mainly the construction, automotive, home appliance and furniture industries. Each of these accounts for 10 to 12-15 percent of the total. e other half of our industrial segments is divided into a series of fragmented industries, including mechanical engineering.

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Prices of welded pipes are still weak in Italy. Italian buyers resist to any price growth and any attempts of Italian suppliers to raise their prices are fruitless. Which are the reasons that prevent a market recovery? What can help to strengthen positions of Italian welded pipe producers? AM: I want to start by saying that as a group, we are leaders in the European welded pipe market, with a production of about 1.3 million mt in Europe primarily articulated in the five Italian pipe plants, but also in the Polish plant (which is growing) and in the British plant (stable and fairly present in all Northern Europe). We also have a significant presence in Brazil and in China. is makes a total production of 1.5 million mt. About 60 percent of Italian production is exported to Europe and neighboring markets, although our target market is Europe. I think the problem of overcapacity is a very topical issue due to a static market, or to better say, even retreating by 20-22 percent compared to peaks reached in 2007-2008. Due to projects launched in 2007-2008 we have increased our capacity in Europe. e problem of overcapacity is a structural issue and competition is very high both in the pipe market and in the entire steel supply chain. Suggesting a solution is pretty diﬃcult. I beVolume 7; Issue 2

lieve that instead of coming from a recovery in demand, a much-wished balance between supply and demand should come through rationalization, which is achieved by two mechanisms: self-limitation of production— which is not always easy, although some operators have objectively contracted their output—and a market selection through consolidation or the compelled “sacrifice” of some operators. Italian steel producers have maintained their production’s stability, if not slightly increased. Reducing our capacity is not an easy task, but I believe that competition will remain high. Only some small producers in the field of precision tubing has actually reduced their capacity or even closed their activity. Overall, however, I would say that the eﬀort for rationalization hasn’t been significant yet.

Speaking of pipes, are there trade barriers or unfair practices by third countries against European producers? AM: ere are actually increasing imports from third countries, especially from Russia, Ukraine, Turkey—India is entering the market too. Despite being on the rise, I must say that they are mostly to Northern Europe, where prices are a little higher. ere are some edge cases that could require antidumping duties, but the competition is

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How do you evaluate the operating and financial results achieved by the company in 2013? AM: We are still finalizing our balance, so excuse me if I am a little generic. In general terms, Marcegaglia’s turnover decreased slight by about 3 percent due to prices, because in terms of volumes we have maintained our production stability—to be honest, we have even increased it slightly (by 1 percent)—even in the face of a contracting market. Last year was satisfactory in terms of volumes, but we are not satisfied in terms of profitability.

It is known that it is necessary to restructure and reduce production capacity in the steel market. According to you, in Italy there have already been steps forward in this direction (through closures, mergers, acquisitions). AM: We at Marcegaglia invested significantly between the years 2008-2012, while in 2013 there were completions of such investments. On the whole, we have invested more than a billion euros. About 60 percent of such investments strengthened the capacity of our Italian activities—not only in flat steel and pipes, but also in stainless steel production. But we also invested abroad, especially in Poland, China and Brazil. Due to the crisis we have not been able yet to express the full potential that we have achieved with such additional investments. In terms of volumes we made some small progress in 2010, 2011 and 2013. In 2010 we even came over the physiological decline that everybody suﬀered in 2009. As I said, we made some small progresses in terms of volumes, but haven’t had the chance to fully exploit our capacities, especially in the context of tubes in Italy. In Poland there has

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been an important change, because we have passed from 30,000 to 200,000 mt in three years, while in the stainless steel sector we went from 240,000-250,000 mt two years ago to more than 300,000 mt for various products including pipes and flats. is passage has been possible through diversification on several fronts, but we have not yet taken advantage of our new potential. We try to do it with the logic of enhancing the range and orientation toward products with high added value, and products which are more sophisticated, also in order to escape the international competition.

What are the main difficulties that the European steel industry is facing? AM: In addition to overcapacity, of which I have already spoken, I would add the problem of a static demand. Europe has also some structural factors of weakness in addition to a weak demand—that is a problem in other areas of the world—the first problem regarding raw materials. Europe has little availability of raw materials such as iron ore and coal (the latter is only somewhat available in Northern Europe). In general, the European steel industry is less integrated than other steel industries, attributed mostly to weakness on costs. Other crucial factors are the cost of labor and energy costs, which are obviously higher in Europe, while a third element of concern regards environmental costs. Speaking of this, I think European environmental policy is rather unrealistic if it is not accompanied by the same eﬀorts from other countries in the world. We as Europe risk being the “champions of the environment”, but we risk counting less and less in the world. is remains a worrying factor in the medium term. We as Europe account approximately for 10 percent of total emissions and this percentage is destined to decrease. e European industry is in danger of becoming less significant on an international level, while for a small percentage on emissions is acting like the most responsible for them. It is quite nonsense. European industry in general (not just the steel industry, but all heavy industries) is likely to be heavily penalized. I think that the European environmental policy is impractical and unrealistic. It risks accelerVolume 7; Issue 2

ating deindustrialization that is already in progress.

In the last few years some countries such as Brazil and India have adopted protectionist measures. How do you consider this phenomenon? AM: It is odd that India, Brazil and somewhat even Russia have on one hand the most competitive primary resources (mineral) and inputs (energy), while on the other hand they have their own domestic prices resulting from such protection. It is a brand politics that is destined to slacken, because the world is moving toward increased free trade. As long as these markets have the advantage of a significant domestic market, they will have double benefits: low resources and high prices. Of course they will have to open more, because they are going to pay this policy both in terms of inflation and in terms of devaluation of their national currency. SO\

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greater among European producers than with third countries. Imports are certainly a phenomenon to monitor and control, but not a shocking factor for competition. As a producer, I cannot say that imports from third countries are to be ignored, because they are not. Up to now we have not proceeded with protectionist practices only because the competition is definitely high but is mainly among European producers.

Bull&Gloom

Mr. Bull: Let me try to lift your spirits a bit, Mr. Gloom, since you must really have been in a depression lately, as some of your paranoid or exaggerated fears seemed to have come true. So far this year, the economic news is somewhat mixed if not downright pessimistic. Now, the US has developed quite nicely just as predicted even though two winter storms in short succession sapped a lot of energy out of the economy with some dire consequences for our domestic, indeed global, steel industry. Even the much maligned Eurozone has shown life this year and has mercifully broken an 18-month cycle of a contracting common economy. No, the problems emanate from the former darlings of investors: the emerging markets spearheaded by China. e Chinese economy continues to grow at a slower than anticipated speed. Fellow BRIC member Brazil followed in China's wake. Even Turkey has shown worrying signs of weakness. A slow domestic economy, a rapidly falling currency and a restless population have clearly brought the strong economic run to an abrupt end. China's steel production started to dip earlier this year and there is no sign that there will be a reversal anytime soon. Consequently, there is less demand for iron ore which directly aﬀects Brazil, Latin America's largest economy last year. Iron ore prices traded around a seven-month low earlier this year and were threatening to go down as low as $115/mt. In the meantime, iron ore inventories are stacking up at Chinese ports. At one time in February there were 97 million tons of iron ore on the ground in various Chinese ports. No wonder prices are falling not only for iron ore but also for scrap in the US and, indeed, steel prices. So, we are in crisis, right? Not. It is a temporary blip which will vanish as soon as the US is strong enough to kick-start growth in most emerging markets again. Mr. Gloom: I must say, my good friend, that I am pleased you now see where I’m coming from, even though I’m not pleased at being right. e wolf is at the door, and if even you now see it, he is ever closer to kicking it in.

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Oversupply and underestimation

If you will read my submissions carefully, you will see that only rarely do I dispute your notion of the strength of the US economy. But that notion of strength is only relative to the rest of the weak sisters out there. e US has its structural financial problems that aren’t going to get better (even your beloved housing statistics are down!), and I disagree that the weather there is the cause of anything measurable. at is only the excuse being given. We all know from history how this printing (in response to 2008) will end. See 1938-39. But I am surely on board with your assessment that the catalyst is coming from places other than the US, as I have long maintained. e “former darlings” are simply now in the boat with the rest of the world; and now that money is running out of places to invest, it will hide. Let’s summarize for our readers: interest rates are climbing, all of the stock indices are teetering, China’s PMI is contracting and has a shadow lending market of close to $6 trillion (according to JPM), the US debt continues to climb (but this gets lost in the applause for the “easing” of the rate of that climb), and Europe’s banks have a liquidity shortfall of about 1 trillion. Can you see even more clearly now? e one common factor to all of this is that last point on Europe: liquidity! In today’s leveraged financial market, that is the wolf that will gobble everything up. But to the raw material markets—there is no good news there either. Long-term, medium-term and short-term, there is vast oversupply of almost everything. Everyone built up production to supply “China’s endless voracious demand” and now it’s gone. And to a large degree, that irrational exuberance is permanently gone. ey will not and cannot continue to produce 75 percent of the world’s steel supply and prosper. And they haven’t shut down anything meaningful and they can’t without even more pain. Meanwhile they are getting locked out of other markets. A hint for our gentle readers on how this will fare, and also the above economic front, are the ocean chartering indices. ey are down, 40-60 percent Volume 7; Issue 2

depending on which one you are talking about, just since December! THAT is a sign of the raw material markets as well as the world economy. Stuﬀ just isn’t moving.

Mr. Bull: Let me get this straight. I’m not coming over to your line of thinking, I merely acknowledged that some of your fears have some merits. It is good to see that you have taken the US oﬀ the hyper-inflation list for now. And yes, I do love my housing stats because they are such a good barometer of where the consumer is standing vis-a-vis taking risks and spending money. We are a consumer industry after all. Traditionally, the first two months of the year are the strongest steel producing months of the year and 2014 is no exception. January and February saw record production numbers again and, overall, an increase of 5 percent is expected for this year. So the 97 million tons of iron ore will be gone soon. at raw material prices are cyclical is nothing new and the steel industry wouldn't know what to do with itself if prices were to remain stable for an extended period of time. It does hurt, however, when prices are on a downtrend. No other market but the US can handle these fluctuations better. In fact, the entire hemisphere has benefitted from the American economic reach. Look no farther than Mexico. e economy is regaining momentum in no small way through a very strong automotive sector. Around three million units a year are being produced right now and domestic car sales were up by 7.7 percent last year. Add to this historically-low interest rates, healthy banks and a government committed to an infrastructure program as well as privatization of key industries, and you have a success story in the making that could positively aﬀect all of Latin America. e region will probably not grow as fast as it did a few years ago, but it will stay stable. Más o menos. is is entirely a normal development. We have seen worse in this area. Mr. Gloom: My friend, you are grasping at straws. China is not going to bail themselves

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Mr. Bull: China does not need anybody to bail them out. ey have more money than they know what to do with. eir accumulated foreign exchange reserves exceeds $3.7 trillion and it is growing by the month. ey have a consistently high current account surplus and could take care of their financial affairs. In fact, they have done rather well in that regard. eir latest trick is to prick the unbelievable credit balloon without causing a Lehman-type crisis the US experienced six years ago. I believe the Bank of China and the powers that be can pull it oﬀ even though it will hurt a little. eir steel production will not go away and continue to flourish for

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years to come, which will stop the iron ore price from falling into the abyss. e continuing juggernaut of Chinese steel mills will keep prices down to a reasonable level. Perhaps we will not see the wild fluctuations of years past. Wouldn't be all that bad, now that I think about it. Please stop decrying the liquidity crisis. As described, there is liquidity in China and even some Euro countries have healthy budget balances. In the US, the private sector is hoarding cash. Conservative estimates have $2 trillion slushing around in corporate coﬀers ready to be invested whenever the time is right. In most cases this means whenever there is a new administration in place in Washington. Apple alone has $160 billion of cash on its hands. At the end of the day, it will be the private sector that will trigger an accelerated recovery with real job growth in the US. Commodity prices will always fluctuate and with America's newly-found oil and gas reserves, energy prices, including petroleum will stay in check and that will help as well.

Mr. Gloom: I agree about the private sector, especially in the US (why isn’t that $2 trillion invested now? e answer should tell even you that I am right). However, China doesn’t really have one—what they do have is indeed a liquidity problem. Even if you believe their currency reserve claims, I don’t. eir largest bank had to sell a bond to cover a $500 million trust product, with a 10 percent annual return promised! Does that sound like a flush, liquid bank to you? eir PMI is contracting; shadow banking is about $6 trillion (talk about a credit bubble!) and shaky; they have sold all their US debt to raise cash and their products (not just steel) are being locked out—do an internet search on Chinese farm-raised seafood. en look at the packages in your grocery store. Even the Chinese don’t buy Chinese farm raised products. But we digress. e bottom line for steel and raw materials is indeed China and their 800 million tons of capacity. ey can’t sell that, they are stockpiling, trying to get by with only trims (and the regional governmental authorities are fighting tooth and nail) and are trying to wait out this “downturn” (hence the raw material stockpiles). It Volume 7; Issue 2

is not going to happen. eir days as the leader are done. e world is going regional in steel and everything else.

Mr. Bull: I can tell that you have substituted China for the US in your doomsday scenario. Well, it is a progress of sorts. Handling a credit bubble situation, managing overcapacity in steel and pursuing a destocking program for iron ore (or any other commodity) are not new phenomena. In fact, they are very well known in the US where these cycles are being handled with regularity, just the way it is supposed to work in an open market. Maybe we can send some advisers to China to guide them through the respective transition periods. I am a lot more sanguine about China than you are for reasons I have stated before. Fears over China's shadow banking system seem to be overblown. e real engine of the global economy will be the US again along with some other traditional economic powerhouses such as Germany and the UK. e US will carry the Latin American sector along to prosperity. You may exclude Venezuela from this scenario, but even here there are signs of change. Chavismo is definitely on its last leg. I am looking forward to this strong economic period in our hemisphere and, indeed, the world. China will be OK but its influence will decrease. Iron ore prices along with other commodities will be flat for a while but then rise like a phoenix from the ashes as the important economies improve and will fuel the demand for consumer goods and everything that goes with it. Steel is part of that picture.

Mr. Gloom: You have misunderstood so much—the question of US, Europe or China is simply a matter of who will trigger the cliﬀ dive. In this leveraged world today, anyone can start the ball rolling. at was why a small nation like Greece was such a concern. ey would have taken down Europe from whom the rest of the world would have caught the disease. e issue, as it always has been in our discussion, is liquidity. With the leveraging that is now the norm, when one bloc has to sell assets to cover, then because of the leverage, that in turn calls in other instruments, and so on. e US is no exception. SO \

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out, let alone anyone else. eir products are being shut out of other countries and they can’t use themselves but half of what they produce. ey need to bite the bullet. To quote one sage about the last great, socialist experiment, the USSR: “eir agony is that they must change. But they can’t.” China has too much invested in their steel industry to let anything other than disaster push them to shut the capacity down. Adding to this wild ride on their state-run capitalism and their shadow lending, and their future is bleak. erefore, raw materials look bleak too. ere is a corresponding level of overcapacity in most raw materials too (not just iron units). Yes, we will have ups and downs but barring that big liquidity event, they are flat and the trading range for them right now is quite narrow; and that is a good thing. is will force the marginal productions to consolidate and the losers to close, as we have seen in iron ore. I guess why this all matters is that many in the steel industry see high raw material prices as good for steel; and that has been largely true. When they can pay more for their charge units, it was because they could pass it along in higher steel prices. However, the new printing press economics of the past six years (has it been that long?), forcing the strengthening of the regional trading blocs, has changed the game. We are moving to a time when each will more and more supply and consume from within their borders. Again, barring that big liquidity event. Watch the Baltic indices, long term interest rates and the sicklies of Europe.

Q No “new normal”

Q&A with Ryan Hoefler

President & CEO

Cobra Trading LLC

SteelOrbis San Diego speaks with Ryan Hoefler, President and CEO of Cobra Trading LLC, about the outlook for scrap in the US.

Many in the US scrap market agree that overcapacity is not just a problem in the global finished steel market—overcapacity is a concern in the global scrap market as well. Can you elaborate? RH: When we discuss overcapacity in the scrap market, we are not referring to there being too much scrap available, we believe there are too many scrap dealers trying to buy the same amount of scrap. Today there is an overcapacity of shredders in the United States and this causes margins to become extremely tight and in some cases nonexistent. A shredder today is a $20 million investment and scrap companies who make this investment are trying to buy scrap at any cost to “feed” their machine. Imagine a market in any US state when there were only two shredders 10 years ago and now there are seven. ose seven are still competing for the same volume as when there was only two.

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Interview

Some have said scrap is, in a sense, a “renewable resource”. Do you agree, or does the scrap market more resemble that of “limited” commodities? RH: : I think renewable resource is the incorrect phrase. Scrap is recycled, and therefore some commodities become limited over time and others are always available depending on how well the economy is performing. For example, what we call “prime” scrap, also known as busheling, is always available. e automotive industry and all of its suppliers are the largest producers of this type of scrap and if they are busy then this type of scrap is plentiful. If the economy is down and they are not running at full capacity, then this scrap is less plentiful. When referring to limited commodities, the scrap world views these as appliances, automobiles, rebar, plate and structural, sheet iron, etc. is is a limited commodity because there is a finite amount of appliances and automobiles that are going to be “scrapped” every year because they have too many miles or are out of date or plain worn out. 2005 through 2008 brought out all of the old “obsolete” scrap as the industry refers to these items because prices were so high. We believe today that there is now a truly limited supply because all the old inventory has already been recycled and shipped to the mills.

Plus, they are reaching further out and interrupting other markets to buy scrap thus putting major pressure on margins.

Scrap dealers throughout the east coast have said that this year’s ongoing bouts of snow have had a negative impact on inventories and collection efforts. How has your company been affected? RH: is has impacted the brokerage business tremendously just, as it has had a negative impact on the physical collection of scrap metal. When the scrap dealers cannot secure material on a consistent basis, they are afraid to make commitments with me because they truly don’t know if they will be able to fill their orders. Rail cars and trucking freight have been profoundly aﬀected because the snow and weather stops them from working and delivering cars and gondolas. Cobra Trading owns a large fleet of railcars and we have had a diﬃcult time moving our own scrap due to the severe weather conditions. Obviously, lower inventories mean less scrap for me to buy and then sell. Looking at long-term price trends for US domestic scrap, it appears that after spiking before the economic crisis and plummeting in the immediate aftermath, prices gradually climbed up to a plateau that might change month-to-month, but only by moderate amounts. Do you think this relative stability could be considered the “new normal”? Why or why not? Volume 7; Issue 2

RH: ere is no new normal in today’s scrap market. Historically, ferrous scrap traded in a tight range. Maybe moving $5-$10 each month. Today’s market that moves up or down $30 is normal. Volatility is here to stay because scrap trading is now part of a larger global market that is aﬀected by governments, currencies, geopolitical events, terrorism, basic supply and demand fundamentals, and market manipulation. e steel mills used to take a long-term approach to their business. Today all they care about is the current month’s “buy”. ey try to buy scrap as cheap as possible every single month. In 2012 the market decreased over $100/ton in 2 months. At the end of the year it was only down on a cumulative basis by $20/ton. Everyone could have avoided a lot of pain and financial suﬀering if the mills would have taken a long-term approach and pushed prices down slowly. Turkish mills re-entered the market in February after being mostly absent since December of last year, yet export yards still sold scrap shipments to mills in the Ohio Valley. Do you think exporters will continue to pursue sales within the domestic market? Why or why not? RH: Exporters are going to sell scrap where they can get paid the most money after factoring in their freight costs. If they can sell into Kentucky or Ohio for the same price or more as they can sell to Turkey then that is what they are going to do. ere is no loyalty

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in selling to Turkey. All things considered, they will probably sell to Turkey because they can load cargoes with 25,000-30,000 metric tons versus loading a barge with only 1,100 metric tons. It is more eﬃcient to load a cargo. Also, they must have confidence that Turkish mills can pay their scrap bill. Exporters could potentially have some concerns with Turkey’s ability to pay after their currency collapse in the beginning of this year.

In late 2012, Turkish steel producer Çolakoğlu set up a Houston-based company called Medtrade Inc. for the purposes of importing rebar directly from Turkey and sourcing scrap directly in the US to ship back to Turkey. Do you think Çolakoğlu is setting a precedent for the international scrap market? Or is this an isolated experience that has not had much impact on the US export scrap market? RH: I think it is an aggressive move to take a position in the US. I think it is isolated because of Turkey’s unique position in the US market as a major scrap importer. I am not well versed on their business so I don’t want

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to speak without having very good knowledge.

It’s been speculated that if scrap prices within the US domestic market fall to a certain point, that China will start making buys off both the US East and West coast. Do you see that happening and if so, how do you feel this will impact the export scrap market on a regional basis? RH: China is always trying to buy scrap as cheap as they can. If they see an opportunity to purchase US generated scrap at reasonable prices then I fully expect activity to pick up. If China enters the market this is a great thing for the entire US market. A healthy US ferrous market has to have players like China and Turkey buying domestic-born scrap and shipping to their country where it will be melted and then used in manufacturing of automobiles and buildings. is import activity puts major pressure on the US domestic steel mills to raise their prices to compete with China and Turkey and not lose their regional scrap to the coasts. ere are many companies in the Midwest United States

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who will load railcars and ship to the export yards if the price works when taking into account the additional freight costs.

Turkey and certain East Asian countries are currently the primary destinations for US export scrap. However, according to US export data, countries in other regions are also consuming significant amounts of US scrap, such as Egypt, India and Peru. What have you seen in terms of efforts to increase marketing efforts toward these regions? Are there any other “hotspots” out there that are poised to increase scrap imports from the US? RH: I have heard of some small deals into India, but this is not a consistent market. India has major infrastructure problems that don’t allow them to become a major global player in the steel market. In addition, there political environment makes getting major infrastructure projects like roads, bridges and ports a long and tedious process. Egypt and Peru are not on the US radar at all. We have seen some activity in Vietnam, but nothing major to speak of at this point. SO \

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ome might call it unparalleled innovation. Others might see it as a natural evolution of how people do business. But regardless as to whether you are pro-social media-based sales models or if you’re an old-school, let’s shake hands over dinner kind of person, one thing is for certain: e “Mad Men” days of scrap trading are a thing of the past. MyScrapNetwork.com is the brainchild of Cobra Trading LLC President and CEO Ryan Hoefler and Niles Iron & Metal Co. LLC trader Matt Smith. e concept, according to this dynamic duo, is simple. To allow people a platform that can streamline the buying, selling and trading of ferrous and non-ferrous scrap. Smith, who started his professional career in the mail room of a well-known Los Angeles-based talent agency said he saw firsthand how targeted, industry-specific social media platforms can forge business connections. “I was eventually promoted to being an agent, and for a while, everyone in the company started using this thing called Casting Networks,” he said, “which basically revolutionized how casting directors would obtain headshots submissions. In the past, everyone would send reels in and instead of using carriers to drop things oﬀ all over town, this centralized everything into a website. Everyone jumped on it. It got rid of the expense of the carriers and made things a lot more efficient.” And several years later, when Smith married into a well-known scrap family, he realized this model could be modified to fit the scrap industry. A few months later he and Hoefler met at an ISRI event in northern Ohio, and the pair got to talking. Fast forward another five years, and that’s when MyScrapNetwork.com really started making a move. ey woke up early, stayed up late, and interviewed more web developers than they cared to count. It wasn’t just about finding the talent, they said, it was about hiring the right fit—someone who

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could take a conceptual idea and place it onto a canvas. Hoefler acknowledges there have been other scrap trading websites before this, but those were put up by web designers. “ey were basically taking an idea like Craigslist or Ebay and making some tweaks and using it to sell scrap,” he said. “And putting all your information out there, including your price points, makes you vulnerable.” So what makes MyScrapNetwork.com different? A lot of things, and it all starts with building your contact list. Users have the ability to send private and partial offers based on contact group assignments. Let’s say you have 10 people in your contact list that buy steel, you can create a group containing those specific contacts. When you’re ready to make an offer, you can send what looks to be an individual offer to each of them. is will include the volume, a photo, how long it will be available and pricing. If you have other people in your contact list that have checked of steel as part of the materials they’re interested in, but they’re not in your “Steel Group”, they’ll be able to see a partial offer. is will include the region of the country it’s in and how long the offer is available. ey won’t be able to see a full description, photos, documents or pricing. ey never know who has put the offer out there because all they get is a teaser. “If this particular buyer is interested, they can send you a request to see more, which you can accept or deny anonymously,” Hoefler said. “Our big thing is privacy and security. All members need to be approved by the site admin in order to verify their legitimacy and credibility.” It will always be free for brokers, consumers and dealers, he said, although premium packages may be available in the future. e idea itself is very simple, they said. It allows buyers to really crack down on the Volume 7; Issue 2

quality control of materials. It also helps them develop new relationships and hold new people accountable. “I really think this is going to be an explosive thing,” Hoefler said. “is really could revolutionize the scrap industry. Information is the most valuable commodity, and this is like having the whole marketplace right at your fingertips. You can have private discussions and even stay connected with people through the use of chat rooms. All of us can vouch that in today’s marketplace and economy, you can use all the help you can get. is is the answer.” “It’s like that one episode of Parks and Recreation, where one of the characters is talking about why online dating is successful,” Smith said. “It’s like walking into a bar where everyone is in a pre-selected age group and shares the same types of religious and personal values as you do. at same model works in business too. is isn’t about taking an in-person business model and making it more informal. It’s just speeding the process up like crazy.” But in a business climate where the good ‘ol boys club model has ruled for years, can the climate really be changed? Smith says yes. “Blockbuster never thought there would come a time to change,” he said. “Change is inevitable.” Hoefler said he’s excited to see more and more people getting started on the website. Although he wouldn’t say how many users have signed up since their January launch, he would say the numbers are very, very impressive. “When Matt brought this concept to me, I’d never seen anything like it,” he said. “I know there are a lot of other websites out there but this is the first. It’s never happened in this industry before now and I feel MyScrapNetwork.com really could turn into something unbelievable.” SO \

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ScrapNetworking

Welcoming the inevitabilityofchange

NewsFocus

An unexpectedoutcome

US OCTG producers banked on severe duties in the recent trade case, but preliminary results squelched their goal of returning focus to the US market.

here had long been rumors about a potential anti-dumping/countervailing duty trade case against oﬀshore producers of oil country tubular goods (OCTG). As far back as the 2012 National Association of Steel Pipe Distributors (NASPD) fall convention, many believed that news of a filing would be waiting in their e-mail inboxes when they returned to work the following week. Quarter after quarter, year after year, the speculation and rumors proved to be just that—speculation and rumors. Rumors gain steam By June 2013, import prices from Korea and Taiwan had fallen for the third consecutive week; unfinished J55 ERW OCTG casing from Korea and Taiwan to the US were being oﬀered at $43.75-$44.75 cwt. ($965987/mt or $875-$895/nt) DDP loaded truck in US Gulf ports, while prices from Vietnam and India to the US were holding steady in the range of $43.50-$44.50 cwt. ($959-$981/mt or $870-$890/nt) DDP loaded truck in US Gulf ports, although anyone who was looking to book larger tonnages could easily get a better price. Korean mills were leading their counterparts in import tonnages, bringing in 58,292 mt (census data) in May; India came in at a distant second, at 16,906 mt (census data) and total world imports were at 220,885 mt (census data) for the month, leading to frustration among US domestic producers. But in July 2013, the proverbial shoe finally dropped, and a collective of US domestic producers filed AD petitions against welded and seamless, finished and unfinished OCTG from India, Korea, the Philippines, Saudi Arabia, Taiwan, ailand, Turkey and in the Ukraine. Countervailing duty petitions were filed against OCTG from India and Turkey. In August, the US International Trade

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Commission decided to move forward with the AD and CVD investigations against nine of the US’ top offshore OCTG suppliers, and new futures offers started to wane. Service centers and distribution centers were hopeful the case would help firm prices, then at $60.00-$61.00 cwt. ($1,323$1,345/mt or $1,200-$1,220/nt) ex-Midwest mill. And no one was surprised when domestic mills rolled out a price increase. In early September, domestic producers announced they’d be raising prices by $5.00 cwt. ($110/mt or $100/nt) and in theory, that was supposed to take effect just as people started to return from the Labor Day holiday. Buyers, though, were more inclined to affix it with a “nice try” gold star sticker and tack it to the fridge. Demand might have been steady, they said, but it wasn’t strong enough to support price firming; especially when September import tonnages for OCTG casing to the US were expected to surpass August import tons (328,102 mt, census data) which were at the highest level in 13 months. If anything, deals slightly below the most commonly transaction range had become more frequent.

Korea remains “unconcerned” As autumn progressed, Korean mills said they were highly optimistic their duties would be low enough to not make much of a diﬀerence in their prices or volumes to the US. Some called that arrogance—others called it wishful thinking. In October, the Department of Commerce’s International Trade Administration announced that preliminary dumping determinations against OCTG casing from countries named in the suit would be delayed until February due to the government shutdown and because the investigation was “extraordinarily complicated”. But Korean OCTG mills were not fazed, still oﬀering to the US in a “business as Volume 7; Issue 2

usual” fashion. At the time, SteelOrbis sources said they were receiving offers from multiple Korean mills and expected this trend would continue unless preliminary dumping margins exceeded 10 percent, which they had agreed to absorb as the importer of record. And since these mills were agreeing to absorb the financial penalties and duties related to the still-pending trade case, traders said they’d “keep on keeping on.” at announcement did, however, spur a $2.25 cwt. ($50/mt or $45/nt) offer price increase, which brought the new approximate range for unfinished Korean OCTG casing to $47.25-$48.75 cwt. ($1,042-$1,063/mt or $945-$965/nt) DDP loaded truck in US Gulf Coast ports. Taiwanese mills were also still offering in the approximate range of $45.00-$46.00 cwt. ($992-$1,014 or $900-$920/nt) DDP loaded truck in US Gulf Coast ports, but they were not signing on as the importer of record, leaving interest in bookings from that country relatively weak. As November progressed, Taiwanese mills did their best to entice US buyers, but failed to garner significant interest. Not only did bookings from Taiwan come with added risk, Korean mills had essentially started to price match their offers on larger orders. Traders said they weren’t overly concerned about booking Korean OCTG, but they did wonder if cargos would be turned around on the water if the duties were high enough. At the same time, Korean mills continued to stress there was nothing to be concerned about, underscoring a belief that their margins would absolutely be less than 10 percent. In terms of the domestic market, prices continued to trend sideways. Total OCTG import tonnages to the US spiked in October, at 359,754 mt (census data) but tapered off in November, to 265,345 mt (census data) and again in December, at 189,705 mt

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Turkish producers also confident Also at that time, Turkish producers of unfinished OCTG casing had started to say they felt confident that no antidumping (AD) or countervailing duties (CVD) would be levied against Turkish OCTG imports in the ongoing investigation. As it stood, results in the administrative review of the CVD investigation suggested that subsidy margins for Turkish pipe mills could be di minimis, or less than 2 percent, although AD margins would not be announced until February. Korean mills also had increased confidence, saying they now believed their margins would be somewhere in the 5 percent range. Domestic producers disagreed. Some US mills believed the final antidumping margins would fall between 25 and 30 percent, and said they looked forward to announcement of preliminary margins. And in late December, when “critical circumstances” allegations were filed in the in the antidumping (AD) investigations of OCTG from Korea, Ukraine, and Vietnam, India and Turkey and in the countervailing duty (CVD) investigations of OCTG from India and Turkey, they rejoiced. On December 23, the DOC ruled that importers of all entries of OCTG from India, except OCTG from Jindal SAW Ltd., would need to make a cash deposit of coun-

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tervailing duties in the amount of 3.5 percent. A negative preliminary determination was made on exporters of OCTG from Turkey, noting only de minimus CVD margins, which Turkish mills has long suspected. In terms of the AD case, Korean mills were still the only ones who had signed on as the importer of record, and trader sources who were the importer of record for orders originating any of the other named countries said this was a concern, especially with regard to shipments that are already on the water. Some even went so far as to indicate they were working on ways to distribute that casing in other places, so as to avoid having it dock in the US. Although both the DOC and ITC would need to make aﬃrmative determinations of critical circumstances for AD or CVD duties to be applied retroactively, trader sources said it was not a risk they are willing to take. An announcement that silenced the room In the days leading up to the preliminary determinations announcement, those involved in the buying and selling of OCTG casing in the US were on the edges of their seats. e general belief was that US prices would firm in line with Korean margins, and domestic producers were ready and waiting to roll out that increase. But on February 18, when the announcement rolled out, jaws collectively dropped. Margins against Korean mills came in at

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zero percent, while margins against Philippine mills were at 8.9 percent. Saudi Arabian mills were at 2.92 percent; Taiwanese producer Chung Hung Steel Corporation was at zero percent, with all other producers and exporters were at 2.65 percent. Ukrainian mills were at 5.31 percent, and although one Vietnamese mill was at 9.58 percent, the others were hit hard, at 111.47 percent. Turkey’s Borusan Mannesmann Boru Sanayi ve Ticaret A.S. and Borusan Istikbal Ticaret T.A.S. were announced at zero percent, with other producers and exporters at 4.87 percent. All producers and exporters in ailand were slapped with 118.32 percent margins, and although Indian producer GVN Fuels Limited had a zero percent margin, all others from the country came in at 55.37 percent. All in all, it’s not the clean sweep domestic mills expected. For now, it’s believed that offshore mills will resume offering OCTG to the US at prices low enough to garner significant interest while still adhering to US Department of Commerce (DOC) guidelines—which will undermine US mills’ efforts to shift focus back to domestics. In fact, one day after the announcement came out, US Steel’s stock prices dropped by nearly 6 percent. Suffice to say, domestic producers are less than thrilled by the level of proposed duties, because at this point, one thing is certain: prices firming isn’t likely to happen anytime soon. SO \

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(census data). is was good news, according to service center sources, but they still didn’t believe prices would firm until the trade case concluded.

Arizona city greenlights steel dam project City council members in Tempe, Arizona have unanimously approved a $24 million project that will allow the city to construct a brand new steel dam at the Tempe Town Lake. Construction contractors at PCL Construction are working with engineers to finalize the design and installation plans. Manufacturing of the dam parts started in January and as it stands, they’re hoping to start the dam construction in April. ose close to the project say construction is scheduled to reach completion in December of next year. If, for some reason, that gets delayed, the city will need to pay monthly rental fees to the company that’s providing the rubber bladders, which are the reason the dam project sprouted legs in the first place. In July 2010, one of the bladders burst, which emptied the lake in a matter of hours. e city has already purchased a steel gate with hydraulic pistons and elected oﬃcials say they look forward to day the dam project is over.

Abandoned trailer park being raided for scrap Residents at the Lakeside Mobile Manor in Mulberry, Florida were forced to abandon their homes last year after local lawmakers shut it down due to a leaking sewer system. Now, the city has about 27 acres worth of condemned trailer homes, many of which are being raided for parts. Doors and siding are being stripped from the dwellings, they said, and it’s believed that other trailer owners are

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the culprits. Even though most of the metal is already gone, hauling the trailers oﬀ to an appropriate disposal site will cost the city $75,000, and the city manager said he’s not OK with the idea of taxpayers footing that bill.

British archaeologists find evidence of steel use dating back to 490-375BC A new analysis of iron artifacts found at an Iron Age hill fort in the British Isles indicate that many of them are quite old. Experts say the discovery oﬀers a lot of insight as to the advanced manufacturing skills that people had during that time period, and gives a hidden peek into their social organization. e technical skills needed to craft highcarbon steel would have only been available to metalworkers who had spent their entire lives to the craft. e process of manufacturing steel requires extensive craftsmanship, skill and knowledge, they said, and it’s far from straightforward. e fact that the people who occupied the hill fort had those abilities shows the community was both organize and advanced, and that these types of complex skills were passed on from generation to generation.

Chinese housing boom tied to illicit affairs Although the boom in construction in China in the last few years has moderated recently, social research has pointed to a surprising demand source for new apartments in major cities: Chinese businessmen supporting their mistresses. Having a piece on the side is common practice among working professionals and government oﬃcials, and many of these women are living in bought-and-paid-for apartments in areas close to their lover’s office. e practice is so common, in fact, that there are entire neighborhoods that are bursting at the seams with women who, were it not for their benefactors, would be living at home. Although quantifying exactly how many Volume 6; Issue 3

apartments are filled with mistresses is diﬃcult at best, experts have said that about 90 percent of businessmen who have been tied to corruption and/or scandal have at least one. It’s about as common as meeting clients for a round of golf, but the cost is much higher. One real estate developer has gone so far as to admit he pays more than $6,000 per month to support a 20-year-old college student who lives in a Beijing apartment.

Tasers + steel mill = lawsuit Attorneys for Nucor steel are still working to sort through a personal injury lawsuit that was filed by a former employee. As of January, plaintiﬀ Michelle Woodyatt turned down their settlement oﬀer and is moving forward with her case, seeking more than $1.4 million in damages which includes loss of income and future medical bills after an onsite prank went awry. e incident took place in 2011 when Woodyatt’s co-workers were playing with a taser-like device which is supposed to be used for pain management. is device, also called a TENS unit, was pilfered from a Nucor nursing station at an adjacent plant. One of the men is said to have snuck up behind her and applied it to both sides of her neck. e voltage that was use was so high, her attorneys said, she was knocked to the ground, hit her head on the asphalt and required emergency medical care. Woodyatt said she sustained a severe concussion and said she’s been rendered permanently disabled. e lawsuit alleges Nucor was negligent not only in their hiring process, but also in the supervision and retention of employees who were known to be reckless pranksters. e company’s attorneys have said they’ll continue to aggressively defend the case in court. Seattle tunnel boring machine thwarted by 8-inch diameter steel pipe e $80-million dollar machine otherwise known as Bertha has the capability to bore through just about anything—rock,

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timber, dirt—but she’s no match for carbon steel pipe. Contractors were hired to use Bertha to help build an underground path for State Route 99 in Seattle, Washington but the machine got stuck on something 60 feet below ground in early December. Crews had no idea what to make of it, and spent weeks trying to figure out what was causing the delay. City oﬃcials said the pipe was laid in 2002 as a means of monitoring groundwater flow. ey said the contractors were well aware of its location because that information had been provided to them months ago. e contractors, however, are saying otherwise. e Department of Transportation said they’re not entirely sure the pipe is the only thing that’s blocking up Bertha, and think the machine’s cutting tools may have been damaged by excessive wear. Seattle Tunnel Partners is currently trying to figure out how much money the delay is going to cost.

to feel sick. Doctors saw the nail on his X-rays and said removing it was a tricky process. eir biggest concern, they said, was potential nerve damage. Mr. Yang was reported to be stable after the procedure was performed and his vision hasn’t suﬀered. e fate of the nail, however, remains uncertain.

Bethlehem Steel exhibit goes on display Pieces of Bethlehem Steel’s former research lab have been hauled away from a Lehigh University Mountaintop facility and have been driven to their new home. ose pieces, according to representatives at the National Museum of Industrial History, are now on display. Now, community members can see the working remnants of the now-defunct steel manufacturer. e CEO of the museum said this is a

The wheelchair, the city council and the $40,000 steel ramp Clare Lally’s wheelchair-bound daughter was having a heck of a time accessing her city-owned home, so she asked the West Dunbartonshire, Scotland city council for permission to build a ramp. Something simple, something basic… But instead, the council moved to construct a 10-level, 60-meter eyesore that takes up their entire front yard. e zig-zagging slope is believed to have cost taxpayers more than $40,000; neighbors say it’s ruined the look of the block. e council has said the massive steel ramp was the only solution, as building regulations strictly prohibit what can and can’t be constructed. What’s worse, is that local skateboarders have taken the structure over, and although the Lallys have asked put a gate on the bottom of it, elected oﬃcials have said no. “It would block the public footpath,” they said. eir neighbors have said they’re completely perplexed, but the council said they were simply responding to the family’s request. e Lallys were existing tenants, they said, and it was the responsibility of the council to make the necessary adaptations to the property. “e family requested a ramp SO \ and that’s what we installed.”

Man survives steel nail to the head Talk about a splitting headache. A 55 year-old Chinese man is said to be recovering well after a do-it-yourself project landed him in the hospital. Mr. Yang said the accident happened just after Christmas when a nail that had been stuck in a cutting machine was dislodged when he turned it on. Oddly enough, he was completely unaware the high-velocity-projectile nail was lodged in his head until several days later, when he went to the hospital after he began

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Volume 6; Issue 3

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great way to help preserve a piece of history. e pieces include a 30,000 pound basic oxygen furnace, steel ladles, a miniature rolling mill and an electric furnace.

Interview

Ironore on the move

SteelOrbis San Diego discusses the logistics of the US iron ore market with Glen Nekvasil, Vice President of the Lake Carriers’ Association.

ake Carriers’ Association (LCA) represents 17 American companies that operate 57 US-flag vessels (“lakers”) on the Great Lakes and carry the raw materials that drive the nation’s economy: iron ore and fluxstone for the steel industry, aggregate and cement for the construction industry, coal for power generation, as well as salt, sand and grain. Collectively, its members can transport more than 115 million tons of dry-bulk cargo per year and employ more than 1,600 men and women, and provide annual wages and benefits of approximately $125 million. In turn, the cargos its members carry generate and sustain more than 103,000 jobs in the eight Great Lakes and have an economic impact of more than $20 billion. Glen Nekvasil joined Lake Carriers’ Association as Director of Public Relations in 1983. He was named Vice President in 2001. His career on the Lakes dates back to 1976. This winter has been especially brutal on all industries, including transportation, intensifying the obstacles cargo ships on the Great Lakes usually face during the season. What have been some specific challenges unique to this winter? How are carriers responding to them? GN: is has been the toughest winter on the Lakes since 1993/1994. We hope it’s not a carbon copy, because that winter the US Coast Guard was breaking ice in the St. Marys River until May 18. ink of it this way, the baseball season was six weeks along and the Coast Guard was still breaking ice. e iron ore and coal trades were most impacted by the early and brutal winter. Iron ore shipments on the Lakes were down 21 percent in December and 37 percent in January. While there has not been any curtailing of production at steel mills, clearly stockpiles were not at the desired level at some mills and we actually kept loading ore out of Escanaba, Michigan, well into February. Some cargos of western, low-sulfur coal were cancelled because of the heavy ice and the frigid temperatures slowed loadings throughout the Lakes. ere isn’t a lot a vessel operator can do. It’s all about the US and Canadian Coast Guards keeping the shipping lanes open to meet the needs of commerce. Unfortunately,

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the icebreakers suﬀered a lot of downtime. We know the conditions were brutal and everyone did their best, but this illustrates how important it is that the US Coast Guard start modernizing its 140-foot-long icebreakers. ey were built in the late 1970s and they need to go the shipyard to extend their serviceable lives. Work starts on the first 140 this summer and the other five will follow over the next five years. Another challenge to Great Lakes carriers is the dredging crisis, which was explored in depth in a Prime magazine article in 2013. Most of the focus was on ocean ports—how are ports on the Great Lakes faring? How would the release of Harbor Maintenance Trust Fund Funds alleviate the problem on the Great Lakes? GN: e Great Lakes are the dredging crisis’ poster child. Lightloading, that is carrying a less-than-full load, is the norm, not the exception. More than 18 million cubic yards of sediment clog Lakes ports and waterways and as a result, our ships are leaving significant amounts of cargo at the loading docks. e biggest ships were carrying more than 70,000 tons each trip back in 1997 when we had near record-high water levels. Since then, the top cargos have rarely been more than 66,000 tons, and at times, loads were falling below 60,000 tons. Volume 7; Issue 2

is is having multiple impacts. For carriers, it affects their bottom line, but equally important, it affects how much cargo their customers can get. Frankly, with carriers leaving so much cargo behind each trip, they’d be hard-pressed to meet the needs of a really strong economy. Again, carriers are very limited in what they can do to offset these lightloads. e vessels are already operating at their most efficient speed, so making more trips is not really an option. e Soo Locks open on March 25 and close on January 15, and there isn’t a lot of flexibility there. And the vessels have to lay-up for a period each winter so they can be maintained and modernized. is winter LCA’s members are investing more than $70 million in their vessels, but that means they have to be taken out of service from mid-January to late March. What’s so frustrating is that the dredging crisis need not exist. e money to dredge the nation’s ports and waterways to project depth is there. e Harbor Maintenance Trust Fund takes in $1.6 billion a year in taxes. If the government would spend that much each year, we wouldn’t have a problem, but the HMTF has been allowed to amass a surplus of $8 billion in the name of paper balancing the budget. We say it’s time to put the “Trust” back in the Trust Fund. e Water Resources Reform and Devel-

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Most of the iron ore that moves on the Lakes ships from ports on Lake Superior, which means it transits through the Soo Locks. Congress approved a second Poesized lock at the Soo in 2007, but full-scale construction has yet to commence. What is Lake Carriers’ Association doing to move twinning the Poe forward? GN: is is very much a priority for LCA. Poe-class vessels, that is vessels restricted to the Poe Lock by their length and/or beam, represent about 70 percent of US-flag carrying capacity on the Lakes. If the Poe Lock went down for a lengthy period of time, USflag shipping on the Lakes would slow to a trickle and cargo movement in Canadian lakers and oceangoing vessels would suﬀer too as there would be tremendous delays with all traﬃc having to use the MacArthur Lock. Congress first authorized a second Poesized lock in 1986, but that Water Resources Development Act also required local sponsors to share in the cost of navigation projects going forward. It was a long fight to get the second Poe-sized lock fully funded by the Federal government, but that finally came in

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2007 thanks to the efforts of Congressman James L. Oberstar (D-MN). It was very fitting that a ship was named after him in 2012. Now the big stumbling block is a flawed benefit/cost ratio analysis. e current assessment believes the railroads could step in and move the iron ore and other cargos. at’s not possible for several reasons. For one, the railroads don’t have enough rolling stock to absorb the Soo Lock trade. Secondly, many steel mills lack rail access. e mill in Cleveland is the most efficient in the world on a tons-per-manhour basis and it can only get iron ore by water. Rail access to the mills at the lower end of Lake Michigan is very limited too. It’s no accident that so many steel mills front the Lakes. Great Lakes freighters have always been the most cost-effective way of moving large quantities of bulk materials. Senator Debbie Stabenow (D-MI) has taken a keen interest in the second Poe-sized Lock and at her behest, the b/c ratio is being reviewed. We think a new analysis will produce a positive b/c ratio.

Coal exports from the US also comprise a large portion of Great Lakes tonnage. China has been a major destination for US coal exports, but since the nation has slowed its previously unrelenting growth, are there other global destinations that could pick up the slack? Are Great Lakes carriers concerned about maintaining the level of coal shipped across the Great Lakes? GN: None of the vessels registered in LCA are certificated for ocean service, so they don’t participate in overseas exports of any cargo. at said, the Lakes did export about 1.3 million tons of western coal to Europe and the UK in each of the last two years. Seaway-sized vessels move the coal to Quebec City where it is loaded into oceangoing colliers. is is the first time coal has been exported from the Lakes in any significant volume since the late 1970s. Nonetheless, the coal trade is in a period of recalibration. Ontario’s decision to phase out the use of coal for power generation has reduced shipments. Also, falling natural gas prices and other factors have prompted some Volume 7; Issue 2

customers to switch to other fuels. Still, coal shipments on the Lakes totaled 24.6 million tons in 2013. at was a slight decrease from 2012, but the trade probably would have registered a slight increase had not the December ice woes delayed or canceled some coal cargos. LCA members moved 18.2 million tons of coal last year. at was actually an increase of nearly 4 percent. Coal will remain one of the “Big 3” cargos on the Lakes for the foreseeable future. (e other two are iron ore and limestone.)

As the Great Lakes provide a natural barrier between the US and Canada, how do cross-border issues come into play regarding carriers? Are there security challenges? Cultural challenges? GN: Our members have good working relationships with Canadian agencies and LCA often partners with Canadian Shipowners Association (CSA), our counterpart in Ottawa. For example, both LCA and CSA are working to bolster icebreaking resources this spring. ere are opportunities for agencies on both sides of the border to streamline their processes and share information more frequently, but all in all, the system works.

We understand a trade association cannot make predictions about future market conditions and trends, but what can you say about Great Lakes shipping in the long-term? GN: Great Lakes shipping will remain a major segment of our transportation system for a long time to come. One of our greatest advantages is that the Lakes are fresh water, which means there’s very little corrosion of hull and machinery. A well-maintained vessel can last almost indefinitely. e oldest ship in the fleet was built in 1906 and this year it begins a new career as a barge. As market conditions permit, our members are repowering their vessels with engines that burn less fuel and produce fewer emissions. Two of our members are exploring switching to LNG. A recent study by the US Maritime Administration noted that repowering achieves about 80 percent of the eﬃciencies of new construction at about 20 percent of the cost. SO \

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opment Act that the House and Senate are conferencing over has great potential for resolving the dredging crisis. Both chambers’ versions call for more spending on dredging and the House bill directs the Corps to manage the Lakes as a system rather than 60 individual ports pitted against one another for dredging dollars. A system approach would help level the playing field with other waterways. e Great Lakes delegation has been incredibly committed to this issue, but two legislators in particular deserve special mention. In the Senate, Carl Levin (D-MI) has been our champion, and in the House, Candice Miller (R-MI) has worked this tirelessly. It really is important that we fully utilize Great Lakes shipping. Waterborne commerce is the most cost-eﬀective way to move bulk cargos. e Corps estimates we save our customers $3.6 billion per year in freight costs when compared to the next least costly mode of transportation. Just as important, ships and barges use less and produce fewer emissions than trains and trucks.

WorldEconomicReport

Worldeconomics onwobblyground

ot much has changed since the year was inaugurated with so much fanfare and hope. Sure enough, the US economy does show strength but it got literally stuck under snow and ice and the economic acceleration had to be postponed until later this year. Still, the US remains the beacon of hope for 2014 and the entire American hemisphere depends on the wellbeing of the US market. China continues to slow down somewhat which has caused huge price fluctuations—mostly downward—in the commodity market. e current growth rate of around 7 percent is disappointing based on the very fast development of just a few years ago; but it is not necessarily catastrophic. A lot of China’s economic wellbeing will hinge on how well the credit bubble is being handled; so far, it has been handled relatively well. Europe is getting ever-so-slowly into a better shape. Low and behold, the Eurozone has managed to overcome its prolonged recession by showing some sort of growth. e rate is hardly worth mentioning but it has a plus in front of it and that is a good sign. e Eurozone debt crisis lingers on but—dare we say it?—it seems to be under control. e United Kingdom has registered a robust growth and oﬃcials feel vindicated because they did join the quantitative easing process. Mexico is a shining star in Latin America, but the region itself is facing turbulences with two of its major economies, Venezuela and Argentina, teetering on the edge of collapse. Global growth will rebound to around 3.5 percent up from 2.9 percent last year. For right now, emerging markets constitute just under 50 percent of the global GDP and it is expected to advance to just over 50 percent by the year 2025.

Americas: Nothing describes the economic development in the US better than the latest final revision for growth of Q4 2013. After a euphoric quarterly growth of 4.1 percent (annualized rate) in Q3, the advanced rate for Q4 was 3.2 percent. e revised rate came in at a meager 2.4 percent and so the economic hobble continues. Overall, the US grew only 1.9 percent in 2013 (compared with 2.8 percent in 2012). e much-watched indicator of housing starts came down to earth as well. After breaking through the 1 million number in December 2013, the beginning of 2014 saw more somber numbers of around 900,000 units (seasonally adjusted annualized rates). e Latin American economic outlook has a lot of light and shadows. Brazil is clearly weakening and Mexico is set to once again take over the role of the area’s leading economy. Mexican growth will be at least 3 percent this year. Its manufacturing sector is firing in all

cylinders which is especially true for the thriving automotive sector. Manufactured exports contribute almost one quarter to Mexico’s GDP right now. For Brazil this number is a paltry 4 percent. Argentina and Venezuela are struggling mightily. Inflation is roaring out of control in both countries, foreign exchange reserves are plummeting and there is real fear that no money will be left to pay foreign creditors. e default scenario is hovering over both these troubled countries. Steel Production North America 2013 (‘000 mt): 119,251mt (-1.9%) Steel Production South America YTD November 2013 (‘000 mt): 46,023mt (-0.8%)

GDP – latest quarter Consumer Prices latest compared to previous one and forecast and forecast 2014 2014

Industrial Production year-on-year

Steel Production 2013 in 000 mt and compared to 2012

United States

+2.4% Q4/+2.8%

+1.6% Jan/+1.6%

+2.9% Jan

86,995 (-2.0%)

Canada

+2.9% Q4/+2.3%

+1.5% Jan/+1.5%

+2.7% Dec

12,460 (-4.8%)

Mexico

+0.7% Q4/+3.0%

+4.5% Jan/+4.5%

-0.3% Dec

18,420 (+1.8%)

Brazil

+2.8% Q4/+1.8%

+5.6% Jan/+6.0%

-2.3% Dec

34.178 (-1.0%)

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uary’s numbers did not help, showing German exports growing by 2.9 percent year-on-year and the trade surplus rising to €15.0 billion compared to €13.6 billion in January 2013. Economic growth in Cyprus, Greece, Finland and Estonia still show negative numbers. e United Kingdom continues its strong recovery but must ponder the economic fallout should Scotland decide to secede. On a more predictable note it was recently announced that property prices in London rose another 12.3 percent last year, pushing their status from merely “unaﬀordable” to “completely insane.” Steel Production 2013 in 000mt and compared to last year: European Union (EU 27): 165,601mt (-1.8%) Other Europe: 36,606mt (-3.3%) CIS Countries (6): 108,741mt (-1.9%)

GDP-latest quarter compared to previous one and forecast 2014

Consumer Prices latest and forecast 2014

Industrial Production year-on-year

Steel Production 2013 in 000 mt and compared to 2012

Germany

+1.5% Q4/+1.8%

+1.2% Feb/+1.4%

+2.9% Dec

42,641 (-0.0%)

France

+1.2% Q4/+0.8%

+0.7% Jan/+0.1%

-0.4% Dec

15,685 (+0.5%)

Italy

+0.5% Q4/+0.4%

+0.5% Feb/+0.8%

-0.7% Dec

24,058 (-11.7%)

Britain

+2.9% Q4/+2.8%

+1.9% Jan/+2.0%

+1.8% Dec

11,855 (+23.8%)

Spain

+0.7% Q4/+0.7%

+0.2% Jan/+0.4%

+3.5% Dec

13,740 (+0.7%)

Russia

+1.2% Q3*/+1.5%

+6.2% Feb/+5.8%

-0.2% Jan

69,402 (-1.5%)

Turkey

+4.4% Q3*/+2.0%

+7.9% Feb/+10.1%

+6.9% Dec

34,658 (-3.4%) *Y.O.Y.

Asia: China’s slowing down with its global economic implication is continuing and the world may have to get used to a “new normal.” February showed a dramatic reduction of exports (-18.1 percent y-o-y) causing a very rare trade deficit of nearly $23 billion. Japan continues its aggressive path of quantitative easing and bringing the value of its currency down. So far in 2014, the Yen has lost almost 20 percent against the US dollar. Japan still runs a trade deficit but its earnings from foreign investments more than make up for this shortfall. A quick note about the country that probably suﬀers the most from China’s economic slowdown: North Korea, commonly known as the

hermit kingdom. Trade between North Korea and China amounts to about $6.0 billion a year, and 90 percent of North Korea’s exports of iron ore, coal and anthracite go to China. Output is dwindling because the mines suﬀer from rundown machinery and erratic electricity supplies. Because of poor quality and delays, China is forcing North Korea to give massive discounts. North Korea’s alternatives are severely limited by international sanctions against them. Incoming foreign exchange has reduced to a trickle. Apparently, the old business model of shaking down the outside world through nuclear blackmail does not work so well any longer.

ASIA SNAPSHOT

GDP – latest quarter compared to previous one and forecast 2014

Consumer Prices latest and forecast 2014

Industrial Production latest twelve months

Steel Production 2013 in 000 mt and compared to 2012

China

+7.4% Q4/+7.2%

+2.5% Jan/+2.8%

+9.7% Dec

779,040 (+7.5%)

Japan

+1.0% Q4/+2.8%

+1.4% Jan/+2.5%

+10.6% Jan

110,570 (+3.1%)

South Korea

+4.0% Q4/+3.3%

+1.0% Feb/+2.0%

-3.8% Jan

66,008 (-4.4%)

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*Y.O.Y.

WorldEconomicReport

Europe: Latest numbers show that the Eurozone economy was “steaming” ahead (by its standards anyway) at +0.3 percent into 2014. e growth picture is showing signs of improvements but the latest scenarios paint a bleaker picture of a looming deflation similar to the one that had Japan in its grip for many years. ere are more calls now for the European Central Bank to start its own quantitative easing program. e US is slowly getting out of this setup just as the Eurozone could well enter it this year. Germany continues to come under attack for its incessant calls for more austerity and its neverending trade—and current account surpluses. Germany’s global trading partners consider this unfair and accomplished at their expense whereas the Germans are pointing to the totally overvalued euro and that they achieve their export success in spite of the currency and through their superior engineering and productivity. Jan-

WorldEconomicReport

Industrial Steel Production YTD Nov Production latest 2013 in 000 mt and compared twelve months

ASIA SNAPSHOT

GDP – latest quarter compared to previous one and forecast 2014

Consumer Prices latest and 2012 number

Malaysia

+5.0%Q3*/+5.0%

+2.8%Oct/+1.3%

+1.7%Oct

India

+6.5%Q3/+5.0%

+11.2%Nov/+9.9%

-1.8%Oct

72,338 (+1.9%)

Australia

+2.3%Q3/+2.7%

+2.2%Q3/+2.0%

+2.7%Q3

4,319(-4.6%)

Taiwan

+1.1%Q3/+2.9%

+0.7%Nov/+1.6%

+0.8%Oct

20,364(+7.8%)

to last year

*Y.O.Y.

Africa / Middle East:

GDP-latest quarter compared to previous one and forecast 2014

Industrial Production

Unemployment

South Africa

+3.8% Q4/+2.5%

+2.6%Dec

24.1%Q4

Saudi Arabia

+3.8% (2013)/+4.0%

5.6% (2013)

Egypt

+1.0%Q3*/+2.0%

-18.1% Dec

13.4%Q4

Israel

+3.5%Q4/+3.4%

7.4%Dec

5.9%Jan

SpecialFocus: Latin America Latin America seems to be a tale of two diverging trading blocks. On the one hand you have the established “Mercosur” that includes three of the area’s biggest but also ailing economies: Brazil, Argentina and Venezuela. On the opposite side (in more ways than one), is the newly-founded Pacific Alliance that includes Mexico, Peru, Chile and Colombia: Latin America’s most exciting and freely trading economies. e projected average growth for the Pacific Alliance for 2014 is 4.25 percent. Growth in all member countries is very strong, and Colombia especially is the newfound darling of foreign investors. In the past 12 months more than $600 million Colombian government bonds have been scooped up, which is by far the highest amount for any emerging market. Even South Korea did not exceed $200 million on the same time period. Business is booming in all member countries, now unshackled from formerly tight regulations. Mercosur member countries, on the other hand, have a more “hands on” approach by their respective governments, and the results are not encouraging. Brazil’s growth will slow to a snail’s pace of 1.9 percent this year and Venezuela and Argentina are now paying the price for government interventions in the past. Inflation is spinning out of control and will exceed 60 percent this year in Venezuela and 30 percent in Argentina. Foreign exchange is getting scarce in both countries and Venezuela has problems procuring parts for the important car industry for lack of hard currency. Additionally, Venezuela has not settled with international airlines for tickets that were sold in bolivars. A default of oﬃcial financial debt still seems to be unlikely but it is a distinct possibility. One observer came up with the rather depressing analogy of “Brazil will become Argentina, Argentina will become Venezuela and Venezuela will become Zimbabwe.” Fortunately, the solution to all that mess is not elusive at all. Just look over to the Pacific Coast!

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scrap

The future of A

s far as the history of steelmaking goes, steel scrap-fed electric arc furnace (EAF) technology is relatively new. But after growing in use and influence in the last few decades, itâ&#x20AC;&#x2122;s time to start looking ahead toward the next big thing in scrap. What new technology will rock the scrap world? Where will new hotspots for scrap develop? Can supply keep up with demand? Forecasting is always tricky business, but whatâ&#x20AC;&#x2122;s the harm in optimistic speculation?

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Natural gas: friend or frenemy? Not too long ago, natural gas prices were prohibitively high, and there was no indication that energy usage in the US would ever shift from a balance of electricity and gas to mostly gas. However, with the development of so-called fracking technology and the discovery of immense shale gas reserves in the US, abundant, inexpensive natural gas is now a reality. At the same time, coal-fired power plants are increasingly subject to the mounting environmental regulations against coal extraction and processing, and nuclear power plants, while clean (carbon footprintwise) and eﬃcient, have seen their reputation suﬀer over the decades, exacerbated by disasters such as the Fukushima plant disaster in Japan a couple years ago. An obvious benefit to EAF mini-mills, especially in areas near shale deposits, would be the opportunity to convert operations to gas-powered and reap the increased profits from a narrowed cost margin. Even if minimills don’t make a full conversion, there is developing technology by which natural gas or furnace exhaust gas can be used to preheat scrap prior to charging it in the furnace. Certain studies concluded that this can result in a 10 percent reduction in electricity used, plus an increased production rate due to decreased tap-to-tap-time. If major steel producers in the US begin to widely implement the use of natural gas in their EAF processes, it might allow them to increase capacity and thus demand for scrap. Additionally, the profit motivations for a natural gas-EAF partnership could encourage more steel companies to get in the game, along with foreign firms who have previously been hesitant to set up operations in the US—again, resulting in a boost in scrap demand. However, the rise of natural gas and its influence in the US steel market might not be a net-positive for the US scrap market. Cheap natural gas is also a key element in the upsurge of direct reduced iron (DRI) facilities. DRI is an alternative iron source that is almost as pure as pig iron, but due to its unique molecular makeup, it can be used in mini-mills to increase the quality of steel produced. Typically, EAF mini-mills are only able to melt scrap, which by nature is swarming with impurities. e ability to create a

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finer grade of steel will allow mini-mills to increase their product range, most notably the flat steel and special-quality steel segments. While there still might be a place for scrap on the less-pure end of the steel product range (mostly long products), there are strategic benefits to controlling input costs, as the steel scrap market is notoriously unpredictable. According to Industrial Info Resources, nearly $800 million has been spent on DRI projects in North America recently, including Nucor’s newly-operational plant in Louisiana that, once the second phase of construction is completed, will have an annual capacity of 5.5 million tons. Future projects include Voestalpine’s $740 million DRI plant in Corpus Christi, Texas, and International Metallics’ $800 million DRI plant in Superior, Wisconsin. It will take time, of course, for DRI plants to grow in number and influence in the steel market, and until then, scrap will remain an essential element of the EAF steelmaking process.

High-tech/low-tech Before scrap even gets to the furnace, new innovations await the scrap segment at the processing level. Better, stronger shredders are constantly available on the market, along with more eﬃcient baling techniques and even increasingly eﬀective tying capabilities. For example, L & P Wire Tie, a division of Leggett & Platt, debuted their Pinnacle Wire-Tie System—the industry's first re-

movable tying module—at an Institute of Scrap Recycling Industries (ISRI) conference a few years ago. Since then, the company has introduced a newer model, the Pinnacle II, which shaves even less time oﬀ a scrap baling machine’s downtime when the wire tier breaks (scrap processors only have to replace the tier with a spare before fixing the other). While the concept of separating the part of a machine with the most movable parts (and consequently, the part the breaks down the most frequently) from the rest of the operation sounds obvious, it is but one of many ways in which complicated problems can solved with the simplest idea. Not that complicated ideas hurt either. Most separation processes in scrap facilities are based on magnetics, one of the oldest human technologies around. Magnetic separation is especially useful in remote applications, such as building demolition. In July 2013, for example, 10,000 tons of rubble was generated when Forbes Hall, a 60-yearold residence hall at the University of Illinois, was demolished to make room for a new dormitory. With the help of magnets, around 98 percent of the rubble was able to be recycled, leaving only about 200 tons of rubble destined for the landfill. But the rise of a newer, yet established technology—Xrays—could soon become the standard in scrap separation (at least at processing facilities). Wendt Corp.’s TITECH x-tract XRF machine uses “energy dispersive X-ray fluorescence spectrometric” equipment to sepa-

Most separation processes in scrap facilities are based on magnetics. Volume 7; Issue 2

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ers and fire hydrants out there. Hotspots around the world According to global analysts, the world as a whole will be a “hotspot” for scrap demand in 2014. In the last short-range outlook issued by the World Steel Association (worldsteel) in October, Hans Jurgen Kerkhoﬀ, worldsteel’s Economics Committee Chairman said “the key risks in the global economy—the eurozone crisis and a hard landing for the Chinese economy have continued to stabilize through the past six months.” Worldsteel puts total global steel demand growth at 3.3 percent, rising to 1.52 billion tons. Aside from Europe and China, other regions, such as the emerging economies of India and Brazil, have not performed as well as many analysts hoped. Even so, steel demand in India is projected to grow by 5.6 percent based on “accelerated attempts to implement structural reforms.” at growth

Steel demand in India is projected to grow by 5.6 percent in 2014.

rate is even more impressive when compared to steelmaking powerhouses China and the US, in each of which worldsteel pegs steel demand growth at 3 percent. As an emerging economy, India does not have much domestic stock of steel scrap, necessitating the import of the product from elsewhere. e Volume 7; Issue 2

US—the world’s largest scrap exporter—sent 523,636 metric tons of scrap to India in 2013, according to SteelOrbis trade data, which puts it in the top ten destinations for US-produced scrap. Looking west, steel demand in Central and South America as a whole is expected to grow by 5 percent in 2014. e steel leader of the region, Brazil, should see steel demand growth of 3.8 percent this year, overcoming earlier, less enthusiastic estimates. Brazil produced 34.2 million tons of crude steel in 2013, reflecting a 1 percent drop from 2012. Additionally, the nation only produces about 10 million tons of scrap per year, but taxes on many steel products, including scrap, guarantees that any growth in domestic scrap production will come from inside—rather than outside—demand. The inevitability of consolidation Another trend on the scrap horizon has little to with scrap processing. e US scrap industry is highly fragmented—in 2013, the four largest firms only generated a little over 10 percent of total industry revenue, according to industry analysts at IBISWorld. As a result, “the industry comprises several small-scale and independently operated firms scattered throughout the US, enabling many small and independently operated firms to enter the industry and cater to a geographically-specific niche market.” However, looking ahead, IBISWorld expects the scrap industry to experience “a less volatile period over the five years to 2018, as metal price fluctuations settle down.” And as the industry “matures”, the trend toward consolidation is projected to intensify. Merger and acquisition activity will increase, mirroring steel producers and steel product manufacturers, which IBISWorld analysts believe will lead to increased revenue each year over the next five years on average. It’s unlikely, however, that major US scrap producers such as Sims Metal Management and Schnitzer Steel will combine forces—it’s more likely that the larger conglomerates will continue to scoop up smaller processors that

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rate copper from ferrous scrap in shredded automobiles. e company also has a machine that uses “dual energy X-ray transmission imaging, which evaluates the average atomic density, shape, and internal structure of shredded material. Outside of the US, steel innovators are bringing fresh ideas to the scrap industry. Brazil-based Trufer, for example, oﬀers a unique way to cut steel mill production costs. Instead of having to melt unwieldy shreds of metal scrap, Trufer processes scrap into smallsize particles (about the size of a grape), which fills up empty spaces in the furnace more eﬃciently and produces more in less time due to the particles’ density (2.0 to 2.5 tons per m²) compared to traditional scrap. Of course, high-tech innovations are not the only necessary change in scrap yards’ future. Certain low-tech or established-tech ideas will soon spread across the US in popularity and use. One of the main concerns at scrap yards involves scrap theft—criminals stealing steel and trying to sell it to scrap processors for a quick buck. Finding exact figures and statistics for scrap theft in the US is nearly impossible, mostly because while there are many scrap thefts reported, stolen scrap recoveries are less frequent. However, ISRI’s website features a database of “success stories” involving solved scrap crimes, and from July 2009 to November 2013, the database boasted 236 arrests/warrants issued and $1,360,870 in recovered property. e policies that scrap processors adopted to reach such high rates of recovery are so obvious, it’s a wonder that some states have to resort to legislation to get scrap yards to enact them: security cameras, ID requirements, license plate numbers, payment waiting periods, and others. In fact, even two strategically-placed cameras and check distribution (instead of cash) would do the trick: one camera facing the scrap seller, and one recording the license plate of everyone who enters the yard. If every scrap yard in the US willingly adopted such measures, there would certainly be less missing manhole cov-

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could benefit from being under a big-name umbrella (before steel mills get to them through vertical integration).

Longevity of influence While it seems to be a given that scrap trends (price, supply, exports, etc.) are the single most influential factor in most finished steel prices, that might not be so for long. ere are already movements afoot to separate raw material fluctuations from mill pricing decisions; they are an anomaly for now, but ideas tend to spread quickly. For almost a decade, Nucor Corp.—and its long product competitors in the US—had released monthly price announcements immediately following the oﬃcial “settling” of scrap prices. While the price movements did not always line up exactly with scrap price movements, the raw material surcharge (RMS) was the undisputed basis of the pricing scheme—after scrap, demand and other market forces were taken into consideration. But last summer, Nucor decided on a pricing policy that “divorced” steel prices from raw material costs. Instead of releasing a letter to customers immediately following the scrap announcement, Nucor would wait a week, sometimes two or more, to decide whether to increase prices, decrease prices, or keep them level until the next announcement. As many would expect, Nucor’s finished steel price trends closely tracked scrap trends, even though they were “oﬃcially” independent. But customers could at least count on one announcement per month. Until they couldn’t. In early March, Gerdau Long Steel North America announced that it would keep prices for rebar, merchant bar and beams level for the time being, despite a dip in scrap prices. Customers in the US eagerly awaited Nucor’s response— Nucor was known for being unpredictable whenever Gerdau made the first move in the monthly price announcements (sometimes they would follow Gerdau, sometimes they would undercut them with a decrease or take charge of the market trend with an increase). But no announcement was released, so customers began inquiring as to when they could expect a response. Nucor representatives answered, on a customer-by-customer basis, that they would no longer issue any

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A gas-powered demand recovery

Mehmet Zeren, Secretary General of the Turkish Steel Pipe Manufacturers Association (CEBID), gives SteelOrbis Istanbul a brief forecast for the steel pipe market in 2014.

How do you see demand for Turkish welded pipe in export markets? What do you think about the developments of export markets for Turkish welded pipes? Which countries do you as strong markets and which countries are losing their ground? MZ: Turkey is the largest welded steel pipe manufacturer in Europe and fifth largest in the world with its 4.2 million tons of annual production. e Turkish steel pipe industry exports almost 45 percent of its production. In 2013, 1.76 million tons of steel pipe were exported from Turkey to almost 140 export destinations. Although there has been an apparent decline in European steel pipe demand in the last two years, almost 34 percent of total exports were destined for European countries. Besides, shale gas exploration has accelerated OCTG pipe demand mainly in North America in recent years. However, OCTG demand has also declined throughout 2013. On the other hand, Turkish steel pipe exports were on the rise in North African and Middle Eastern countries due to construction of new natural gas and oil pipelines and other construction works. Europe has been a traditional market for Turkish steel pipe manufacturers for years. However, the share of European countries in Turkish steel pipe exports has been gradually declining. Steel pipe demand is stronger in developing countries such as Iraq, Algeria, and Egypt. Moreover, Iran and Russia are potential export destinations for Turkish steel pipe manufacturers. Which new markets Turkish suppliers would see as potential and like to enter? MZ: North African and Middle Eastern countries are potential markets for Turkish suppliers. Turkish steel pipe manufacturers have a comparative advantage of logistics in these countries. Moreover, steel pipe demand in Eastern European and Sub-Saharan African countries seem promising for steel pipe manufacturers. What is your expectation regarding welded pipe markets in Europe in 2014? MZ: Overall GDP is expected to rise in Europe comparing to previous years. Moreover, construction activity will pick up in Europe in 2014. erefore, we expect that European steel pipe demand will recover in 2014 and exports of steel pipes from Turkey will increase.

sort of official announcement when there is no movement in prices. Increases and decreases would still merit a mass e-mailed letter. Mill customers wondered about the implication of this move. Did it mean that Nucor could offer widespread deals without violating any sort of official promise of sideways prices, or insist on higher prices when inside information on supply/demand dynamics indicated an uptick in the general market was imminent? Or was it just another move in a long-term strategy of lumping in raw materials as just another cost of producVolume 7; Issue 2

tion, no more or less influential than energy, transportation, or labor costs? Either way, customers were now able to envision a market in which scrap was not the primary driver of steel prices. Although Nucor is the only major US mill as of press time to commit to such a vision, it might be only a matter of time before other mills follow. And if that happens, it would beat out all the aforementioned “next big things” and become the most significant thing to happen to the scrap market since someone first got the bright idea to melt an old car and turn it into rebar. SO \

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Interview

A cornucopia ofconcerns

Li Dayong, general manager of Cangzhou QianCheng Steel Pipe Co, LTD, examines the major concerns facing the Chinese steel industry in 2014 with SteelOrbis Shanghai. In 2013, the overall concerns in the Chinese steel industry included: oversupply, shortage in demand, ups and downs in average steel prices, and many more. Under these kinds of market conditions, how did your company adapt? Are you satisfied with your company’s performance in 2013? LD: As mentioned, the current period is tough for the steel industry. However, by structuring adjustment and upgrading, we are still confident in the prospects for the future steel market. As for Cangzhou Qiancheng Steel-Pipe Group Co. (QCCO), which specializes in producing and selling steel pipes and pipe fittings in North China, we are starting to adjust our product structure. Meanwhile, our company is making eﬀorts to improve management and technology, to increase products’ competitiveness. As far as market development, we have also adjusted our strategy, from focusing on the domestic market previously to paying equal attention to the international market. Up to now, our strategy adjustment has met our expected target, with both of our domestic and overseas markets having been enlarged.

The market condition for the steel industry in 2014 is still tough, facing new challenges. Of course, new business opportunities have also been found—how do you forecast your company’s prospects for 2014? LD: Despite slow economic growth and economic restructuring in China, the issue of overcapacity in China’s steel industry has become very serious; crude steel output will increase to 815 million mt, up 3 percent year-on-year in 2014, as CISA estimated. Meanwhile, the demand for steel products

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will see a year-on-year rise of 3.2 percent, to 715 million mt, which is supported by construction activities in China’s small and medium cities and towns. us, we hold a cautious but optimistic attitude toward the steel industry’s future prospects. We will firmly implement our company’s strategy of “going abroad” by taking part in international steel exhibitions, and we are also considering setting up an overseas branch, to improve the company’s influence among the global market.

Recently, several steel traders in Shanghai have been taken to court due to financial issues. Data showed in first half of 2013, there were more than 600 cases related to financial borrowing in steel industry. Now, banks are becoming very cautious. How does your company deal with this financial issue? What is your opinion on risks caused by fund chain breaks in steel trading? LD: In my point of view, though steel trading enterprises confronted diﬃculties, bank financing is allowed when documents are complete and activities are legal. Our company will submit required documents when we need financing, and we will pay close attention to our liability-asset ratio, which could ensure finance safety of the company. Furthermore, we are in favor of more aggressive monitoring and examining procedures by banks as mutual safety is important for the two parties. In 2013, China imported 819 million mt of iron ore, up 10.2 percent compared to 744 million mt in 2012. Iron ore prices in the Chinese domestic market were easy to increase but hard to decrease over the last year. Have you suffered losses from this Volume 7; Issue 2

issue in 2013? What is your point of view toward the iron ore trend in 2014? LD: We also met problems relating to the rapid rise and slow decline of iron ore prices compared with finished steel prices over the past year. In my opinion, it is a big challenge for management and executives of steel enterprises because it is very important to make an accurate estimation for iron ore and finished steel price trends. As for iron ore prices in 2014, we believe that they will show a slight decreasing trend due to high capacity in the market and slow growth in the global economy. However, CISA estimated that China will import 870 million mt iron ore in 2014, indicating an increase of 6 percent year-on-year, which will likely exert a positive impact on iron ore prices.

Due to the smog that has frequently enveloped Chinese cities in recent years, China’s central government started to take measures to tackle the pollution problem. In particular, by reducing capacity and upgrading environmental technology in the steel and coking coal industries. Has your company been affected? How do you think the backward capacity elimination and environmental protection actions will affect the steel industry this year? LD: e backward capacity elimination implemented in 2013 has not aﬀected our company as we do not have backward capacity. However, we think it’s very good to take measures to protect the environment and limit new capacity the market. Overcapacity has been a sustaining problem in the Chinese steel market. We hope the central government could enhance management of the steel industry, but we do not think part of backward capacity being eliminated will exert a major impact on steel prices. SO \

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Events

Commiserating overconcerns

Steel industry events in early 2014 had many newsworthy issues to discuss, whether through heated Q&A portions of speaker sessions, or casual banter at cocktail receptions. Tensions run high at RWR 2014 Near the end of SteelOrbis’ annual Rebar & Wire Rod conference held January 20 in Las Vegas, tensions were high, as attendees had the rare chance to hear perspectives on the current rebar trade case against Turkish and Mexican mills from someone representing Turkish exporters. But before Namik Ekinci, Chairman of the Turkish Steel Exporters Association, took the podium, an optimistic groundwork for the US longs market was laid by the two other speakers. Bob Risser, President and CEO of the Concrete Reinforcing Steel Institute (CRSI), opened his speech by informing everyone in the reinforcing steel business that they’re really in the concrete business. e CRSI aims to bridge that gap, Risser said, and urged attendees to shape the future of the market rather than just “letting it happen to us.” e association is following this strategy by developing its own set of standards for downstream reinforcing steel, and also by focusing on target markets and game-changing opportunities. Healthcare, education, and oﬃce buildings are all end-use sectors with a high level of potential future activity, said Risser, but above all, the US needs a long-term, well-funded highway bill, as infrastructure accounts for 25 percent of the reinforcing steel market. But aside from end-use possibilities, Risser touched on a certain emerging technology as the biggest game-changer in the market: voided slabs. Because voided slabs involve hard plastic balls taking up most of the space, the technology can accomplish much bigger spans of concrete than what standard reinforced concrete is able to. While voided slabs are not commonplace quite yet, Risser still

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sees demand for rebar on a strong uptrend; CRSI forecasts an increase in rebar consumption in the US to reach 8.2 million tons this year, thanks to pent-up demand in the construction sector. Burke Byer, President and CEO of Byer Steel, was not as entirely optimistic as Risser, pointing out various concerns for the independent steel producer/fabricator while still expressing hope. Byer claimed that US domestic steel consumption was only up 1 percent in the last two years while production was down 1 percent—and the gap represents an opportunity for imports. Overall, said Byer, the US imports about 30 percent of the steel the country consumes, and the more the problem of global overcapacity grows, so will the margins between import and domestic prices, as foreign mills get desperate to unload steel elsewhere. He noted that US mills could help boost consumption of domestically-sourced steel by increasing capacity utiVolume 7; Issue 2

lization, but the rate has stagnated in the low 70 percentile since the end of the economic crisis. Nevertheless, Byer said, the US still has several advantages over other steel-producing countries. Access to raw materials, top-notch technology, increasing energy eﬃciency, and high productivity will carry US steel producers into the future, despite global dynamics. Finally, Ekinci took the podium to declare that Turkish steel producers desire a free and fair global steel market, and in no way believe they are harming US rebar producers. In fact, Ekinci pointed out, the US is not even Turkey’s main market for exports—the Middle East is, exemplified by the fact that all the rebar used to build the world’s tallest building, the Burj Khalifa in Dubai, was produced in Turkey. While he claimed the US is too “protectionist”, he insisted that Turkish steelmakers do not receive any subsidies from the government, and there is no way Turkish rebar imports are injuring the US market be-

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margins in the US are too high, and Turkish producers are satisfied with smaller margins. Byer even joined in, asking if the subsidies were not direct, but perhaps the result of Turkish mills selling at a loss, and then the government subsidizing the loss. But Ekinci said that this is not possible— Turkish mills are not that punitive. Additionally, subsidies are not even legal in the Turkish market, based on the terms of Turkey’s treaty with the European Union. Finally, someone else in the audience pointed out the VAT, which allows a Turkish producer to be rebated 18 percent when it exports steel. Ekinci stated this was not considered a subsidy, but even so, without it they would find it diﬃcult to export steel to the US.

TradeLawInsights

Lewis Leibowitz, a partner at Washington, D.C.-based trade law firm Hogan Lovells US LLP, was scheduled to speak at SteelOrbis’ Rebar & Wire Rod Conference in Las Vegas, but an unexpected emergency resulted in his inability to attend. Here, he shares his prepared presentation, plus discusses topics relating to the US long product import market with SteelOrbis San Diego in a post-conference interview.

What is your outlook regarding the upcoming trade case against rebar imports from Turkey and Mexico? Will the “critical circumstances” allegation be implemented? Will the final margins be high or low?

LL: In most cases, the Commerce Department finds margins of dumping. ere is no reason to doubt that the Department will find margins in two antidumping and one countervailing duty investigation. e cases will continue regardless of the preliminary determinations. Furthermore, the actual duties on any imports will not necessarily be the same as the deposit requirements. Importers will face diﬀerent final duties after an administrative review of the orders, once they are entered. Critical circumstances are virtually never finally granted; but they can be burdensome to importers during the pendency of an investigation. Importers need to be aware that Customs may require cash deposits for entries that were previously made, if the Department of Commerce preliminarily finds critical circumstances. ese can be addressed by counsel. It would not be prudent to speculate on whether the margins will be high or low. Very high margins (over 50 percent) are often the result of respondents not filing adequate responses to the Commerce questionnaires.

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Turkey recently started offering rebar to the US again after a break, with prices well underneath offers from “alternative” import sources like Portugal, Spain and Korea. Do you think this means Turkey is committed to the US market despite the final outcome of the trade case?

LL: Each Turkish exporter will have to answer that question. Each one has separate market strategies. e risk of high duties can be reduced by careful planning.

At our RWR conference, Namik Ekinci, Chairman of the Turkish Steel Exporters Association, claimed that Turkish mills do not receive subsidies of any sort from the Turkish government, primarily because subsidies would go against Turkey’s treaty with the EU. However, someone in the audience pointed out that Turkish exports are still subject to the VAT, which acts a subsidy in itself, even if it isn’t classified as such. Do you think the VAT is a run-around on Turkey’s anti-subsidy rules? Do you think Turkish

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Events

cause the US has many advantages—most of them the same as described by Byer earlier, emphasizing the fact that the US has all the scrap it wants in its own backyard, while Turkey has to import most of the 32.5 million tons of scrap it consumes each year. Ekinci said he expects the antidumping/countervailing duty investigations to be canceled, as such cases do more harm to the overall global market than they aim to fix. But this explanation was not satisfying to some in the audience, who pressed Ekinci further during the Q&A session after the presentations. One attendee asked how it was possible for Turkey to buy scrap from the US and send it back as cheaper rebar. Ekinci answered—to much laughter—that profit

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mills would be able to export to the US and remain competitive without the VAT?

LL: No. A VAT is not considered a subsidy under global trading rules. I think that is the right answer. e Subsidies Agreement of the WTO specifically permits exports to receive a rebate of VAT. Unless the product is sent to the US, all exports generally face VAT in the importing country. us, it balances out.

Ekinci also said during the conference that the reason Turkey is able to import scrap from the US and send it back to the US in the form of cheaper rebar is that Turkish mills are satisfied with smaller profit margins—it’s the US producers who demand too much profit, and thus set higher prices. Do you think this in an underlying cultural explanation for why US producers are so willing to file trade lawsuits against foreign competitors? Or do you think, in the current rebar case specifically, that something else must be going on for foreign producers to be able to offer steel for so much cheaper?

LL: ere are many reasons that some companies are able to undersell others and still make a profit. For example, Turkish producers may be more eﬃcient than their American competitors. If Turkish producers are confident they can keep their margins low, they can price accordingly. e Commerce Department will examine the prices, compare them with “normal value” (home market prices or costs of production and impose the resulting duties, if any). When Mexico was hit with duties against wire rod imports to the US, it circumvented the ruling by sending wire rod that was slightly thinner than the disputed product. Do you think Mexican mills might try the same thing with rebar if the trade case does not go their way? From disaster to demand: NASPD mill panel discusses the implication of outdated pipelines During the annual National Association of Steel Pipe Distributors conference in New Orleans last week, members of the mill panel discussed the future of steel pipe demand in general, citing specifically the need to replace outdated pipelines. According to the panel, most of the inthe-ground line pipe throughout the United States is between 50 and 90 years old. Industry experts say all of that needs to be replaced, and it’s just a matter of time before those orders start coming in. While some industry players wonder if there’s a way to speed up that rate of replacement, others feel it will take a significant

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LL: e basis for a circumvention finding in the wire case may or may not be relevant to the rebar case. at depends on the details of the scope of the case and the relevant market. It is hard to make a connection without detailed knowledge of the facts.

Many US-based traders have said that many trade cases are only filed to “scare” the market—US mills don’t really think the case will go through, they just want to scare customers away from imports for a while to temporarily boost their margins. Do you think this is true, or just a gripe from those in the US market who are most negatively affected by trade cases?

LL: It is not possible for me to comment on the motivation of petitioners. If one looks at the cases filed and their success rate, and what happens to imports after a case is filed, it is possible that a strong case can have lasting eﬀects. Even a negative final injury determination may have an eﬀect on the market. Do you have any other general remarks about the recent trade case or US imports in general?

LL: e anticompetitive aspects of trade remedy cases are “baked in” to the law. e abuses that many critics complain about are features of the law, not any character flaws that may exist among the petitioners or respondents. at is why we have looked for years at abuses of the law: adverse facts available; the retrospective collection system in the US (and nowhere else); the failure of the law to consider short supply and the public interest of the market, including consumers. If US companies are injured by dumping or subsidies, there is good reason to provide a remedy. Just not the remedies we have, which disregard the national economic interest, and sometimes the commitments the US has made to the world trading system.

event to expedite the process. “In the United States, another San Bruno needs to happen in order to make that faster,” said TMK IPSCO Chairman Piotr Galitzine, referring to the 2010 explosion in Volume 7; Issue 2

a San Francisco suburb that occurred when a 70-year-old natural gas pipeline, made with 30-inch diameter line pipe, burst into flames. Approximately 38 houses were leveled and eight people lost their lives. Lesser tragedies, such as a series of recent water main breaks in San Diego—attributed to 60-year-old standard pipe—are not enough to spur the public outrage apparently necessary to fund pipeline replacement, as are several similar instances across the US. SO \

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Interview

From point Ato pointB

SteelOrbis Istanbul discusses steel logistics with A. Rifat Karakimseli, Chairman of the Board, Marti Shipping & Ship Management Co.

Please provide an overview of Marti Shipping & Ship Management Co. Inc. AK: Marti Shipping Agency, a leading name in the industry, was established in 1980 and has kept growing since then. We extend tailor-made agency services to vessels calling any Turkish port in tramp or liner voyage and we have been acting as general agents in Turkey for a serious number of first class trading companies for decades. Our agency operations cover a wide scale of commodity types ranging from grain products to LPG, from petroleum products to coal, from steel products to all kinds of general cargo. We manifest yearly over 1,600kt steel products and 900kt petroleum products and lpg, as well as high volumes of general cargo, forest products and grain cargos. Besides, with subsidiary company Martı Konteyner Hizmetleri (Marti Container Services) that represents container lines such as COSCO, SCI, ADMIRAL, we have been doing container shipping, land transport with 55 big-rigs and container storage service in our Hadimkoy, Istanbul facility. What is iron and steel’s percentage in your business volume? AK: Without doubt, iron and steel has very considerable share in our business as it shares more than half of our 3 million tons of cargo capacity per year. In details with figures, we have been dealing with 1.5 million tons of flat steel, 300,000 tons of long steel and 50,000 tons of other steel products a year.

Looking at the developments in steel business, how do you see the relation between iron and steel and logistics? How do these developments affect logistics? AK: We can see clearly that millions of tons of raw material, semi-products and products

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related to steel are experiencing translocation at this very moment all over the world and again all over the world, a lot of people in the factories are calculating almost minutes for avoiding any halt in production, so absolutely yes, I agree with the fact that logistics and steel are tied with thick rope. e steel business is a fast developing sector and the quantity of general and high value added product range is increasing. Due to these facts, we are shaping our strategies relating investments and our future vision in line with the pace of developments in steel business. We are fully aware that logistics should follow the pace of developments in steel business.

How do low margins and slackness in steel markets affect your margins? AK: Slackness in steel markets naturally causes re-considering all costs, which triggers the fact that everybody not only decreases the costs but re-form the margins in accordance with market conditions. Due to the fact that keeping the margins is not under our control exactly, trying to create value added service products for all our customers, we are trying to keep our margins with emphasizing our uniqueness and service quality.

order to decrease costs; so, these two factors have been preventing container shipping to take a greater share from steel business pie.

Which destinations and steel products are lively in your view? AK: e lively destinations can be seen in line with the status of economy in developed and emerging countries as steel is consumed in accordance with that. It seems that Far East, Europe and South America are most active destinations with steel products for automotive, industrial business and construction sectors.

How have freight rates shaped up in the first three months in 2014? AK: We think that the general slackness in global freight market will continue; however, short-term changes may be seen in specific time period according to the relation beSO \ tween supply-demand.

What is your opinion of container shipping in the steel business? AK: It is a fact that the container shipping has been gaining speed in the last 20 years and increasing its share in steel business. However, due to global economical circumstances, the production points seem to gather on specific locations; also, products all over the world are shipped by large amounts in

Volume 7; Issue 2

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WSDStrategicInsights

WSD Strategic Insights XXX: Breakthrough steelmaking technology is better than sex! By Peter Marcus, World Steel Dynamics

he adaption of breakthrough steel technologies, at least from the viewpoint of the outsider looking down at the world, is about the feelings of great pleasure on the part of those who invent the machines, install them and operate them to the benefit of the firm—i.e., adding to the firm’s “economic rent.” It’s an endeavor that brings out the endorphins in all of those involved in the process. Might one say that the implementation of breakthrough steelmaking technologies is better than sex? e answer, most definitely, is “yes.” As we all know, the diﬀerence between the man and the boy is the price of the toy. And, there is nothing as expensive as a breakthrough technology. Key steel industry technological breakthroughs

Looking back to the 1800s, we list four: 1. e invention of the Bessemer converter steelmaking (1856) and Siemens Martin (1865) steelmaking processes. Subsequently, the cost to produce steel fell dramatically. 2. e creation of the hot strip mill. e American Rolling Mill Company (ARMCO)—based on the ingenuity of John Butler Tytus—in 1921 started up the first hot strip mill at Ashland, Kentucky. Output using the existing hand-mill process was about 520 tons per month. e new 14stand mill at first produced 9,000 tons per month and was boosted to 40,000 tons per month three years later. (Note: is mill was superseded by a rolling mill built in 1926 at Columbia Steel in Butler, Pennsylvania by United Engineer and Foundry Company— owned today by Danieli). Consider these factoids: • e oldest highly productive HSM that’s operating in the world today is probably located at the Zaporizhstal plant in Ukraine. It was designed in 1935 and started up in April 1938. When I saw it 48

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about four years ago, it was producing more than three million tons per year with a typical coil size of about 9 tons. • In the early 1930s, so many wide hot strip mills were under construction in the USA, at about $30 million each, that they accounted in one year for about 1/12th of total private investment in the country. In comparison, in China today, the combined spending by the iron ore and steel industries is about $110 billion, or about 2 percent of 2013’s fixed asset investment of about $7.2 trillion. 3. Continuous casting of liquid steel into billet and slab. • Billet casting started in 1952 at Barrow Steel in England. Subsequently, especially in the United States, continuous casting of rebar took oﬀ in the 1960s due to the availability of cheap electricity for the EAF, low steel scrap prices and far lower operating costs than for an integrated mill because the ingot-breakdown billet mill was eliminated. • in-slab casting to feed the finishing train of a hot strip mill started up in late 1988 at Nucor’s facility in Crawfordsville, Indiana. Interestingly, at that time, the price of steel scrap was about $100 per gross ton versus about $375$400 per gross ton today. 4. Computer controls that precisely control steelmaking-related and steel rolling processes. e start-up of Nucor’s thinslab/HRB plant in Indiana in late 1988, symbolically to WSD, is the start of this era. As a consequence, the “cost above” to produce steel sheet products has been sharply reduced due to the decreased usage of energy, raw materials and man power. WSD issued a breakthrough report in 1992 titled “Nuking the Competition” that estimated Crawfordsville’s cost to produce hot-rolled band in 1991 at $221 per net ton versus $266 per net ton for a low-cost integrated steel plant - an advantage of 17 percent for Nucor. As of January 2014, based Volume 7; Issue 2

on our monthly World Cost Curve data, a typical thin-slab/flat-rolled plant in the USA had an operating cost of about $557 per net ton versus only $455 per net ton for the low cost integrated steel plant with its own iron ore supply—a disadvantage of 18 percent (excluding depreciation and interest expense). e main cause of the violent swing in the cost comparison is the cost of steel scrap and other metallics: For the EAF-based mill, these amounted to $105 per net ton in 1992 and about $395 per net ton in January 2014 (although down sharply in price in February 2014). e steelmaking technology revolution tied to computer controls has included: • Amazingly precise controls for virtually all phases of the steelmaking and steel rolling process. • A lessened proportion of secondary and oﬀ-grade steel that’s produced. • Significant cost reduction. Labor productivity is much improved. Energy and other materials are used far more eﬃciently (as noted above). • Less pollution. • More tons produced from the same unit. • Lessened capital intensity—i.e., investment per ton of capacity. Also, same smaller-sized units have achieved good economies of scale. • e breakdown of the last barriers of entry for mini-mills to produce hotrolled band. Who’s winning the war? However, the steel industry can’t sit back on its hands and rest on its laurels. Today, the industry is facing a serious challenge, which is the use of aluminum body sheet on the new 2015 Ford F-150 truck - with a weight savings of 700 pounds per truck. Aluminum is about a 1/3 of the weight of steel; although, it’s not as strong, weldable or formable as steel (because aluminum sheet tends to snap back after it is formed). Also, www.steelorbis.com

e invisible hand is moving at warp speed e Information Revolution, of course, is an amplifier of the Industrial Revolution.

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Let’s consider how it’s impacting the competitiveness of manufacturers in diﬀerent parts of the world. • In the period from the 1960s to the 1980s, before the current Information Revolution was in eﬀect, the Japanese were the biggest winners. Since then, they’ve become the biggest losers. What happened? About 20 years ago, Japan was the undisputed winner when it came to global manufacturing prowess. In the period from the 1960s through the early 1990s, Japan had by far the world’s best workers. And, its product quality and product innovation was unrivaled. e country was zapped by the Information Revolution. e application of the computer to manufacturing processes permitted Japan’s workers, who were paid a high wage, to be replaced by more numerous workers that were paid far lower wages. e new factories in China often produced products that about matched the Japanese when it came to quality. Computer controls were increasingly adapted in China to make ever-better products. • Who’s the biggest winner now and, potentially, the biggest loser in the future? It’s China. In the period from 2000 to 2013, fixed asset investment in China

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rose from one-third to 50 percent of GDP. Manufacturing costs fell and GDP on a current dollar basis grew more than 10 percent per year. But, we are now in a new era in which the advancement in the use of computers to control the manufacturing process, along with a phenomenon called “global sourcing,” is benefitting those who seek to build a new factory in the USA perhaps even more than those in China because the labor content of the product is sharply reduced (due to the lessened man hours needed to manufacture the product). Key Question: Are the greatest benefits from the Information Revolution now leapfrogging—i.e., bypassing—the Developing World including China and benefitting new factories in the Advanced Countries the most? What’s your opinion?

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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it’s also probably more expensive to repair when it’s damaged, including a significant investment by body shops that don’t have the repair equipment. But, it’s probably just as strong and perhaps even more dent resistant than steel. (Note: Ford is oﬀering a $20,000 contribution for body shops that install equipment to repair aluminum.) Interestingly, about two decades ago, aluminum won the beverage can war even though the liquid in an aluminum can warms up far faster than in a steel can. Currently, there’s a continued shift to the use of aluminum car wheels that are lighter and perhaps more shock resistant than steel wheels. e challenge for steel companies that produce automotive sheet is to provide oﬀthe-shelf advanced high-strength steel (AHSS) solutions for designers of new cars that are far better and/or far less expensive than the aluminum alternative—which is a critical requirement since newly-designed models are being launched at a far faster pace than in the past.

SupplyLines

MERGERS & ACQUISITIONS

Although many companies continued to face challenges to profitability, stability and growth in early 2014, this didn’t have an impact on merger and acquisition activity, which is still going strong.

ArcelorMittal and NSSMC complete purchase of ThyssenKrupp Steel USA Global steelmaker ArcelorMittal announced in late February that, together with Japan-based Nippon Steel & Sumitomo Metal Corporation (NSSMC), it completed the acquisition of yssenKrupp Steel USA, a steel processing plant in Calvert, Alabama, having received all necessary regulatory approvals. e transaction, a 50/50 joint venture with NSSMC, was completed for an agreed price of $1.55 billion plus working capital and net debt adjustment.e Calvert plant, which will now be called AM/NS Calvert, has a total capacity of 5.3 million tons including hot rolling, cold rolling, coating and finishing lines. According to NSSMC’s statement, the Calvert site will serve the expanding automotive steel market in North America, especially in southern areas of the US. e new joint venture will have the capability to meet the growing needs, especially from Japanese car manufacturers, for ultra high tensile strength products with good formability, and hot rolled steel products including high tensile strength grades, in addition to the current supply of cold rolled steel and coated products produced at two ArcelorMittal units in Calvert. Majestic Steel completes purchase of Texas-based Flatrolled Steel Inc. In mid-December, Cleveland, Ohio-based Majestic Steel USA announced they had completed the acquisition of Flatrolled Steel Inc. of Houston, Texas, which will run under the Majestic Steel Name. “We see this as an opportunity to expand our reach in the Southwest region while continuing to support the existing business,” said Todd Leebow, President of Majestic Steel, in a statement. “We’re looking forward to welcoming the Flatrolled Steel associates to the Majestic family.” Terms of the sale were not disclosed.

Mexico’s ICH to spend $611 million on acquisitions in 2014 Mexican steel producer Industrias CH (ICH) announced in midDecember that they had $611 million in cash available to make acquisitions in 2014. Sources close to the firm said that increased operations would materialize in the short term, depending on the recovery of the domestic market in infrastructure construction. e company also confirmed an intention to add new companies to its operations, but it still expected a good deal when considering acquisitions. Meanwhile, Fernando Bolaños, an analyst with Monex, said that in 2014 there will be an estimated 8.8 percent growth in sales and

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23.4 percent in the company’s operating cash flow. “Purchases can be specialized to focus on small manufacturing steel or steel pipe, as previously happened when acquired for $538 million Corporación Aceros DM in 2008,” he said.

Vale forms JV with Brazilian power company During the last month of December, Brazilian mining giant Vale agreed to the formation of joint venture with power producer Cemig Geracao e Transmissao, part of the company’s cost-cutting efforts. e new JV, which will involve Cemig’s stake in six hydroelectric power plants with a total installed capacity of 1,158MW, will be called Aliança Geração de Energia S/A, with Vale assuming a 55 percent interest. While Vale did not disclose its financial obligation in the JV, Cemig announced in a separate statement that its participation is valued at 2.03 billion reais (US$874 million). Northwest Pipe acquires pipe joint producer During the first week of January, Vancouver, Washington, USbased Northwest Pipe Company announced it acquired Permalok Corporation, a fabricator of steel piping utilizing the Permalok patented interlocking pipe joining system. Permalok’s interlocking pipe joining system complements and expands Northwest Pipe’s offerings by providing alternate joint solutions, they said. e acquisition also strengthens Northwest Pipe Company’s Water Transmission business with Permalok’s rolled and welded steel pipe products currently being used in trenchless applications. Northwest Pipe Company sees opportunities to expand in other segments such as structural pipe, industrial and the water transmission business. Cliffs extends iron ore supply agreement with ArcelorMittal USA Cleveland, Ohio-based Cliffs Natural Resources Inc. announced in February that it has entered into a revised commercial agreement with ArcelorMittal USA Inc. to supply iron ore pellets for an additional two years through the end of January 2017, with a mutual option to extend for a third year. In addition, Cliffs and ArcelorMittal USA have also extended their joint partnership for the Empire Mine located on the Marquette Iron Range in Michigan. Previously, Cliffs had announced the impending closure of the Empire Mine. Until the amended commercial agreement was reached the mine did not have a customer for pellet production beyond 2014.

Volume 7; Issue 2

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SupplyLines

CAPACITY UPDATES

Expansion activity during the first part of 2014 seemed to be moving at full speed ahead. And now, with experts continuing to forecast improvements in their economic forecast, this trend could well continue through the balance of 2014. Vale lifts weather-related force majeure During the first week of January, Vale SA announced it had lifted the force majeure declared on December 27 on a number of its ironore sales contracts. Heavy rains and generally unfavorable weather conditions impacted shipments in the Southeastern part of the country, they said, especially in the state of Espírito Santo. During that time, the impact on iron ore shipments was limited to 2.5 million metric tons from the original estimate of 3-4 million metric tons in December, of which up to 1.3 million metric tons could be potentially recovered in the first quarter of 2014

Cargill to open new steel processing and distribution center in Colorado On January 8, Cargill Inc. announced plans to build a new steel processing center in Windsor, Colorado, about 60 miles north of Denver, to supply the state’s booming oil and gas industry. e new plant will be operated by Cargill Metals Supply Chain (CMSC), a subsidiary of Minneapolis-based Cargill that operates eight hot-rolled steel processing centers and five distribution centers worldwide. Construction on the $10 million, 60,000-square-foot steel processing and distribution facility will commence early this year and production is slated to be completed near the end of 2014. e plant will process hot-rolled steel coils into cut-to-length steel sheet and plate products up to a half-inch thick. e facility will also serve as a distribution center for the company’s “ultra-flat RPS steel product” from Cargill’s Granite City, Illinois, plant and its sheet and plate products produced at the company’s Port of Catoosa plant in Oklahoma, according to the statement.

$800 million DRI plant planned for Wisconsin On January 31, news outlets reported that the Douglas County, Wisconsin Board of Supervisors approved an agreement with the city of Superior that will begin the process for Reston, Virginia-based International Metallics Corporation (IMC) to build an $800 million DRI plant. e facility, which should begin operation in 2017, will produce about 2.5 million tons of hot briquetted iron each year at full capacity. US Steel clears state permits to expand Minntac mine During the last week of January, US Steel announced they had

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received state permits from Minnesota to expand their Mountain Iron-based Minntac taconite mine by 483 acres. e expansion, which represents a $40 million investment, will allow the facility to continue producing taconite pellets for the next 16 years. Just one week prior to that, the Minnesota Pollution Control Agency issued a water quality permit for the expansion, while the Department of Natural Resources issued an updated permit to mine. However, US Steel still would still need a wetlands permit from the US Army Corps of Engineers—a decision on the permit should come this spring.

POSCO opens second galvanizing plant in Mexico South Korean steelmaker POSCO announced on January 28 that it completed construction of a second plant in Mexico for the production of galvanized steel sheets used in auto frames. e new plant in Altamira, Tamaulipas state, will have an annual production of 500,000 tons; POSCO’s total production in Mexico will thus rise to 900,000 tons per year with the completion of the new plant, resulting in the company becoming the second-largest steel manufacturer in the region, behind Ternium’s 1.5 million ton annual production. POSCO began manufacturing operations in Mexico in 2009, and according to the company, Mexico is strategically crucial for the production of galvanized steel sheets because of its proximity to the US, the world’s largest auto market. Annual car exports from Mexico are expected to surpass 4 million within five years, according to analysts.

Tejas Tubular to build plant in Nebraska On January 30, Houston, Texas-based Tejas Tubular Products, a manufacturer of steel tubing to the oil and gas industry, announced plans to build a factory in Norfolk, Nebraska. Construction on the 350,000-square-foot facility will begin this spring, with a completion date in the third quarter of 2015. Nucor’s Norfolk mill will supply approximately 150,000 tons of steel for products that include casing, drill pipe, and line pipe for oil and gas production. Shortly after Tejas Tubular Products announced they would build a new plant in Norfolk, Nebraska, Nucor Corp., announced plans to expand its Norfolk facility. e expansion will involve a $70 million investment in the plant’s melt shop to increase productivity by over 20 percent, according to SO \ Nucor Steel Norfolk General Manager Dirk Peterson.

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QuarterlyRound-up

Quarterly Round-up Nucor

US Steel

Net income/loss Q1 2013

Net income/loss Q2 2013

Net income/loss Q3 2013

Net income/loss Q4 2013

$84.8 million

$85.1 million

$147.6 million

$170.5 million

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

(-)38.06%

(-)41.56%

0.35%

(-)24.22%

73.44%

33.82%

15.51%

24.54%

Net income/loss Q1 2013 (-)$73 million

AK Steel

Severstal

ArcelorMittal

Steel Dynamics

Gerdau

Net income/loss Q2 2013 (-)$78 million

Net income/loss Q3 2013 (-)$1.8 billion

Net income/loss Q4 2013 (-)$122 million

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

(-)46%

66.67%

(-)6.85%

(-)177.23

(-)2207.69%

(-)4190.91%

93.22%

(-)144.00%

Net income/loss Q1 2012

Net income/loss Q2 2013

Net income/loss Q3 2013

Net income/loss Q4 2013

(-)$9.9 million

(-)$40.4 million

(-)$31.7 million

$35.2 million

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

95.7%

16.81%

(-)308.01%

94.42%

21.54%

47.95%

211.04%

115.28%

Net income/loss Q1 2013

Net income/loss Q2 2013

Net income/loss Q3 2013

Net income/loss Q4 2013

$44 million

(-)$44 million

$157 million

(-)$74 million

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

129.33%

89.67%

200%

128.39%

456.82%

(-)52.28%

(-)147.13%

50.67%

Net income/loss Q1 2013

Net income/loss Q2 2013

Net income/loss Q3 2013

Net income/loss Q4 2013

(-)$348 million

(-)$780 million

(-)$193 million

(-)$1.2 billion

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

91.01%

(-)3263.64%

(-)124.14%

(-)181.34%

75.26%

(-)172.21%

69.23%

(-)521.76

Net income/loss Q1 2013

Net income/loss Q2 2013

Net income/loss Q3 2013

Net income/loss Q4 2013

$48 million

$29 million

$57 million

$55 million

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

(-)21.31%

4.35%

39.58%

34.83%

96.56%

345.31%

(-)3.51%

(-)9.84%

Net income/loss Q1 2013

Net income/loss Q2 2013

Net income/loss Q3 2013

Net income/loss Q4 2013

$160 million

$401 million

$642 million

$492 million

Change from Q4 2012

Change from Q1 2012

Change from Q1 2013

Change from Q2 2012

Change from Q2 2013

Change from Q3 2012

Change from Q3 2013

Change from Q4 2012

120%

(-)23%

150%

49%

60%

220%

(-)23.5%

580%

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Volume 7; Issue 2

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LatinAmericanDispatches

Raw materials enrich Brazil

SteelOrbis Americas’ Brazilian correspondent describes how iron ore is not the only steelmaking raw material making waves in South America.

he mineral extraction industry in Brazil had an outstanding performance on 2013’s trade balance result. According to figures released by the Brazilian Ministry of Development, Industry and International trade, Brazil increased the value of exports of iron ore in 2013, which reached US$32.492 billion against US$30.988 billion recorded in 2012. Exports of iron ore to China, which represents 49 percent of the total, increased 6.8 percent and reached US$15.9 billion. e biggest sales increase was to the Netherlands, which accumulated a high of 30 percent last year. e largest drop was in sales to Italy, down 23 percent. Despite China have been showing signals of deceleration due to the supposed pressure of the Chinese government to reduce inventories of steel, analysts continue predicting the maintenance of iron ore prices for 2014. As of February, the negotiated price was around US$130/ton. Foreseeing a positive scenario, Brazilianbased iron ore producer Vale will increase production capacity of iron ore by 50 percent by 2018. is announcement was made in December by the executive director of Ferrous and Strategy José Carlos Martins, in his presentation to investors at the New York Stock Exchange (NYSE). e mining firm, which in 2013 had the capacity to produce 306 million tons of ore, should increase this number to around 450 million tons in 2018. In order to accomplish this, Vale is investing a total of $37 billion in the next four years. Apart from iron ore, steelmakers are also increasing capacity to take advantage of the current positive scenario in the steel industry, and reduce bottlenecks for expansion. Despite the booming business regarding iron

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ore, Brazil is deficient in other important raw materials for steel segment, such as coking coal. Brazil imports nearly all the coking coal it consumes, which is why this commodity is of great concern to Brazilian steel mills that are seeking to expand investments to guarantee more stability. In Brazil, the only metallurgical coal pro-

duced domestically is from Santa Catarina— it is classified as coking coal but it still has high ash content (18.5 percent) and sulfur (1.5 percent). e operation in Santa Catarina is controlled by Companhia Siderúrgica do Atlântico (CSA), which belongs to the German group yssenKrupp in association with Vale. However, this plant has just entered a new stage of technical adjustments to achieve a good operating standard for the next years. Since 2008, Gerdau has been investing in the production of metallurgical coke and coal reserves, located in Colombia. “is investment is part of the Gerdau Group growth strategy and represents a further step to ensure the supply of key raw materials for steel production,” said Gerdau’s CEO, André Gerdau Johannpeter. e unit has an annual production capacVolume 7; Issue 2

ity of 1 million tons of metallurgical coke and reserves, according to preliminary estimates, and total 20 million tons of coking coal. e total coke production is destined for export, mainly to the United States, Peru, Canada and Brazil. Although countries like United States, Australia and Colombia dominate exports of coking coal to Brazil, with 71 percent of that market, new players are emerging thanks to the expansion of the participation of Vale in the coke segment. e Moatize Mine in Mozambique has been producing coal since July 2011, and represents one of the largest investments within the segment. According to Vale’s website, the expected production of coal ore at Moatize plant by 2015 will be of 22 millions of tons. Brazil is also increasing its presence in the steel scrap market to supply steel makers locally and abroad. On 2013, exports of scrap iron and steel grew 10 percent compared to the same period of 2012, reaching 373 thousand tons and revenues of US$145 million, according to data from MDIC. In Brazil, the share of scrap in the production of crude steel ranges between 26 percent and 28 percent, while the world average in 2012 was 45 percent. In addition to lower participation, ferrous scrap in Brazil has a lower price (about 30 percent to 40 percent) compared to the international market. However, according to Inesfa, Brazil only exports about 3.5 percent of total steel scrap produced (the grades that are not acquired by the domestic mills). In worldwide comparison, the scrap export market represents just 0.2 percent of the total trade balance. e major importer of this material is the United States. SO \

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by Michael McNulty, Editor, Wire Forming Technology International. Reprinted with permission from Wire Forming Technology International Winter 2014 issue

Machines for welding wire together with electrodes to make mesh have been around for a long time, but each year there seems to be new unique features, innovations and capabilities available to wire forming companies. Here is a sampling of developments and trends we have observed over the past several years: • User friendly graphical interfaces. • Faster setups and changeovers requiring less operator know-how or specialized skills. • Production of three-dimensional mesh panels in a single operation and on a single machine. • Reduced energy usage. For example, power-optimized resistance welding to meet the increased demand for energy efficiency. • Saving of production space, new lines taking up less floor space than traditional lines. • Reduced weld sparking. • Increased weld quality. • Improved guiding and handling of welding heads. • Modular system design. • Automated feeding and finished parts handling systems, and integration of end functions. • Multiple position welding. • Flexible machines capable of job-shop and longrun production in one machine. • Aﬀordable, single-purpose machines. • Small-batch production capabilities. • Handling of smaller wire diameters. • Extended wire operational range and mesh sizes on the same system.

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I am sure that there are more developments already available and underway. Mesh welding machine builders and suppliers can bring you up-to-date on the details and the state-of-the-art in machines and processing techniques. Mesh welding systems have evolved in response to market demands for higher quality, lower cost, faster delivery time and shorter production runs. Today, the focus is on high output, precise and repeatable finished product dimensions, easy setup, fast changeover time and operator friendliness. Features like automatic tool and wire positioning, servo drives, sophisticated computer control and interface, modular design, etc., are common on modern mesh welding lines. Be careful, however, to match your current and future needs with the right machine—in some cases, the long-run machine still may be the best bet. Mesh welding equipment manufacturers can help you select the machine that is best for you and your company.

Cortec introduces multi-metal corrosion protection for any enclosure

Coming from Cortec’s® EcoSonic line, VpCI®-105 Emitters powered by NANOVpCI® are unique, patented, compact, spacesaving, high-tech systems. ey are designed to provide corrosion protection for metal components and parts enclosed in non-ventilated control boxes, cabinets or tool boxes up to 142 liters (5 cubic feet). ese ecoVolume 7; Issue 2

Fabricator’sCorner

Spotlight on mesh welding

Fabricators Corner nomical, non-toxic and safe to handle emitters emit Vapor phase Corrosion Inhibitors (VpCI®s), which form a monomolecular protective coating on all metal surfaces. Corrosion of complex electronic and electrical equipment is an increasingly serious problem which triggers expensive failures during manufacturing, shipping, storage or field operations. It can be caused by numerous factors such as salt, humidity, moisture,

contaminants, etc. By using Ecosonic VpCI® 105 Emitter, corrosion can be stopped at any step from manufacturing to final installation. EcoSonic VpCI® -105 is a plastic emitter with a breathable Tyvek® membrane through which the corrosion inhibitor is released. It provides long-term protection against corrosion even in the presence of adverse conditions including salt, moisture, airborne contaminants, H2S, SO2, NH3, and others. VpCI®-105 Emitters are very eﬀective in polluted and humid environments and provide continuous protection for up to 24 months. ese emitters do not interfere with electrical, optical or mechanical surface properties, they are extremely simple, quick and

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convenient to install and protect during operation and shutdown. Products are free of nitrites, halogens, and phosphates and have very low VOC values. No spraying, wiping or dipping is required. Cortec® VpCI® -105 Emitters are successfully used in numerous applications worldwide. Typical applications: • Packaging and storage of electrical, electronic and marine navigation equipment • Aerospace electrical controls and electric motors, switching equipment • Medical and telecommunications equipment, terminal, fuse and power boxes • Scientific and measuring instruments, remote electronics devices • Hand-held battery-operated devices, tool-boxes, gun safes, and any other enclosure for metal storage Ecosonic VpCI®-105 Emitter meets Southern California Clean Air Act and other national and local regulations. It is accepted by FDA for corrosion protection of electrical and electronic equipment within food processing plants and approved for U.S. military and NATO as well as NSN 6850-01-4062060. e product conforms to NACE Standard 0487-2000, MIL I-22110C and is RoHS Compliant.

NDC Infrared Engineering introduces new thickness-gauging systems NDC Infrared Engineering has introduced its new Advanced Metals Gauging systems for thickness, coating weight and flatness measurement for the steel, aluminum and non-ferrous metals processes. ese new metals systems are based on NDC’s Total Distributed Intelligence (TDi) system architecture that has been proven across thousands of different processes and applications since its introduction in 2006. NDC’s TDi architecture is designed to operate in hostile mill environments and deliver exceptional reliability, accuracy and low cost of ownership. High reliability approaching 100 percent is

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essential as often metals process equipment cannot be serviced while the line is operational. NDC’s rugged TDi platform achieves this through reduced complexity, fewer parts and minimal maintenance requirements. NDC’s metals gauging systems enjoy a long heritage in the business with over 60 years experience including the legendary AccuRayTM and IRMTM brands. AccuRay established their reputation in the metals industry specializing in high-performance measurements using nucleonic technologies for stringent applications. ey also developed one of the first mono-energetic x-ray sensors with a permanent calibration to measure metals flat sheet thickness and metallic coatings, while IRM were the first to supply optical triangulation flatness measurement to the steel industry. IRM’s Rometer flatness measurement system was introduced in 1980 and continues to set the standard for on-line, high capability flatness measurement. ese legendary metals products now provide state-of–the art measurement performance for the metals industry with the advantage of NDC’s TDi architecture. In addition NDC’s R&D, manufacturing and Customer Care capabilities provide unparalleled resources backed by extensive measurement and applications expertise. Together, this team delivers greater value to metals producers through continued investment in new technologies, exciting new products and a strong worldwide customer support organization.

ARKU establishes rebuild service for parts levelers and coil lines in North America

ARKU’s US operation has instituted a new rebuilding service for its levelers and coil lines in North America. e company is also providing spare parts, rebuilding and sales of used parts levelers from other manufacturers, subject to availability. e program turns out likeVolume 7; Issue 2

new equipment for a fraction of new-machine cost, and the work can be done at the customer’s site or at the company’s plant in Cincinnati. e company is now purchasing older machines to rebuild and sell as they become available. Refurbished machines carry a six month warranty. e program started in Germany with great success and was expanded to the company’s stateside facilities. “We’ve already rebuilt and sold some levelers, both our own and other manufacturers” said Franck Hirschmann, VP Sales, ARKU Coil Systems. “Our technicians disassemble, clean, inspect and replace worn parts, and return the machines to like-new appearance and performance.”

e program has also become the de facto parts and reconditioning operation for parts levelers no longer supported by the original manufacturers. “We primarily rebuild our own equipment, but we’ve also accumulated a supply of parts and a few used machines made by other companies,” said Hirschmann. “We replace a lot of wear parts like bearings and universal shafts. We’ve even replaced electrical cabinets and converted a highspeed coil line leveler to a parts leveler, which runs at a slower speed.” SO \

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BrainTeasers

Crossword

41. e Port of Lazaro Cardenas is in this Mexican state 43. Nickname for US-flag vessels on the Great Lakes 44. is metal is about a third of the weight of steel

Across

1. International Metallics Corp. was approved to build a DRI plant in this US state 4. is company recently introduced a system for multi-metal corrosion protection in any enclosure 8. President of the Concrete Reinforcing Steel Institute (last name) 9. Northwest Pipe Co. acquired this steel piping fabricator in January 10. Nucor did not respond to a sideways price move letter for rebar from this competitor in March 11. Another name for busheling scrap 14. e Economics Committee Chairman at worldsteel (last name) 16. Term that means carrying a less-than-full load 17. Shale gas exploration has accelerated demand for this type of pipe in North America 19. One of the South American countries that is “struggling mightily” 23. Chairman of the Turkish Steel Exporters Association who spoke at SteelOrbis’ RWR event in January (last name) 24. Turkish rebar producers have been accused of receiving these from the Turkish government 25. e US government program widely vilified by conservative media outlets 26. NDC Infrared introduced a new system for gauging this 27. Mexican drug cartel that illegally exported iron ore 30. Tejas Tubular’s new Nebraska pipe factory will get most of its steel from this neighboring producer 35. is Brazilian scrap processor breaks down scrap shreds to small, easy to manage pellets 38. Brazil is deficient in producing this steelmaking raw material 39. Magnetic separation was used to extract steel scrap from this dormitory at the University of Illinois 40. e US exported half a million tons of scrap to this country in 2013

Down 2. Turkish pipe exports are on the rise in the Middle East and this region 3. ArcelorMittal and this Japanese-based conglomerate acquired yssenkrupp’s Alabama steel plant 4. is company plans to build a new steel processing center in Colorado 5. Evrim Resources signed a five-year iron ore agreement with ArcelorMittal to explore for iron ore in this country 6. Most of the iron ore that moves on the US Great Lakes ships from ports on this lake 7. is Turkish steel producer set up an oﬃce in Houston, Texas in 2012 11. DRI is a purer grade of raw steel than scrap, but not as pure as this 12. Vale lifted a force majeure after heavy rains hit this part of Brazil 13. is company has two versions of X-ray scrap separation machines 15. Name of L&P Wire Tie’s first-generation wire tie system 18. e steelmaking process invented in 1856 20. is type of gas can be used to preheat scrap in an EAF 21. Acronym for the Turkish Steel Pipe Manufacturers Association 22. is South American country only exports 3.5 percent of its total steel scrap 27. e first hot strip mill was located in this US state 28. is South Korean steelmaker plans to build a second galvanizing line in Mexico 29. In the period between the 1960s and 1980s, this country was the “biggest winner” in the Information Revolution 31. e oldest hot strip mill still in production is located in this country 32. Italy’s imports of steel pipe are increasing from Ukraine, Turkey and this country 33. A Brazilian power company joined with this major iron ore producer in December 34. President of Majestic Steel (last name) 36. Billet casting first started in 1952 at Barrow Steel in this country 37. US Steel cleared permits in January to expand this Minnesota mine 42. is analyst group estimates that China will import 870 million metric tons of iron ore in 2014 Answers on page 63

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Panama City, Panama

he Museum of Biodiversity: Bridge of Life, which is currently finishing up construction in Panama City, Panama, is nothing like you’ve ever seen. e space reflects its surroundings and tells a story in colorful steel at an amazingly iconic location. It is sure to be an internationally recognized architectural marvel and tourist destination when it opens this spring—its economic impact is estimated at $6.7 million per year and it is expected to create thousands of jobs in tourism-related industries. e museum, which is slated to open in May or June, is part interactive exhibition gallery, part aquarium, part atrium, part café, park botanical park, part retail space and all welcome center. e vibrant 43,000-squarefoot museum is visible at a great distance by visitors arriving by cruise ship. It overlooks the Pacific entrance to the Panama Canal on the Amador Causeway, land that was once a US Army base. In addition, it is in close proximity to downtown Panama City and Sovereignty National Park, a lush rainforest. More than a decade ago, the country’s government established “Fundacion Amador,” a private nonprofit foundation of more than 100 interested local companies to build this unique structure. e foundation sought out famous architect Frank Gehry, who has his own ties to Panama—his wife was born there. e Museum of Biodiversity, or the Biomuseo, is the world-renowned architect’s first project in Latin America, but it certainly fits his deconstructive style. Gehry’s assignment was no small task. He was tapped to create a natural science museum to serve as Panama’s architectural icon. e museum was designed to tell the story of how the Isthmus of Panama rose

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f ro m t h e sea, uniting two continents—North and South America—and two oceans—the Atlantic and Pacific. e museum sets out to teach about how this formation changed the biodiversity of the planet forever, according to the museum’s website. It also serves to unite arts and science, and serve as a catalyst for environmental stewardship. e project, which broke ground in 2005, consists of 16 separate buildings with steel roof elements. e roof is comprised of 49 flat steel panels designed to look like a rain forest canopy. In addition, the space includes two aquariums at 130,000 and 102,000 gallons, and several smaller tanks and displays. e two large tanks will house sea life from the Atlantic and the Pacific. e project’s structural engineer Magnusson Klemencic Associates (MKA) said it invented a new structural system for this structure. e Seattle-based firm explained that each roof is individually shaped, sized, angled and supported by an understory of stacked steel and concrete “trunks”—and that each roof element demanded a diﬀerent solution to attach, varying from flat beams to steel trusses to custom digitally produced curved beams. Much of the structure is exposed steel.e staggered canopies protect the interior from rain and allow cross-ventilation in the hot and humid climate of Panama. Anand Devarajan, a partner with Gehry Partners, told e Architects Newspaper, “we saw it as an evolution of the corrugated steel deck over a roof truss that one would see in many of the shed-like structures throughout Panama City.” One challenge for the design team was finding local firms to build out the complex space. Many components of the project, such as the steel roof and canopies and concrete work, are uncommon in Panama, which has Volume 7; Issue 2

mostly concrete construction. Reportedly, a number of elements needed to be reinstalled, several times. MKA and Gehry recommended Columbia Wire & Iron Works to train local steel fabricator Grupo Nova to bridge the technology gap and transfer knowledge and methods of working with steel. CWI reportedly spent three months training the Panamanian firm. It is said the relationship fostered during this project established the technical steel knowledge needed for future steel-based construction in Panama. “Panama has a different expectation of construction practices and procedures,” the Gehry office told the Architectural Record. “is naturally leads to a slower cadence. Although the path to completion has been longer than we anticipated, we feel the project has successfully met both our client’s and our own aspirations, and we hope that it will be an exciting destination for Panamanians and visitors to the country.” Gehry, likely best known for his design of the titanium-covered Guggenheim Museum in Bilbao, Spain and the Walt Disney Concert Hall in Los Angeles, rounded out his team with structural engineering firm O.M. Ramirez Y Asociados, Southern Californiabased mechanical engineers Donn C. Gilmore & Associates and J.E. Kiamco Y Asociados. To date some $95 million has been spent on the project, which has suffered numerous fundraising and construction setbacks. When open, the Museum of Biodiversity will be home to eight permanent exhibits, including the “Panamarama,” a three-story projection space with 10 screens showing an audiovisual presentation of the natural wonders that makeup the ecosystems in Panama, and the “e Living Network,” a huge sculpture showing how all living creatures and organizations are related and equally SO \ important.

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SteelMarvels

Biomuseo

Rebar

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

week 3 week 4 week 5 week 6 week 7 week 8 week 9 week 10

Min. Max. 580 590 575 585 570 585 560 575 560 575 560 570 560 570 555 565

Average 570 560 560 540 520 520 520 520

Hot Rolled Coils

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

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

week 3 week 4 week 5 week 6 week 7 week 8 week 9 week 10

Min. 535 535 535 535 535 535 535 535

Min. 535 535 535 530 530 525 520 520

Crossword Answers: Across 1. WISCONSIN 4. CORTEC 8. RISSER 9. PERMALOK

Max. 590 590 590 590 555 580 570 570

Max. 545 545 545 535 535 530 530 530

10. GERDAU 11. PRIME 14. KERKHOFF 16. LIGHTLOADING 17. OCTG 19. VENEZUELA 23. EKINCI 24. SUBSIDIES 25. OBAMACARE

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A3 CIS Export FOB Black Sea (USD/mt) Min. Max. 361 365 356 361 352 357 341 346 321 326 321 326 321 326 321 326

Billets week 3 week 4 week 5 week 6 week 7 week 8 week 9 week 10

Base Sizes USA Domestic mill price (USD/mt) Min. 739 761 761 739 739 739 739 739

(3-12 mm) China Export FOB (USD/mt) Average 535 530 530 530 530 530 530 530

Wire Rod

Max. 761 783 783 761 761 761 761 761

USA domestic mill prices (USD/mt) Min. 733 733 728 728 728 694 672 672

26. THICKNESS 27. KNIGHTS TEMPLAR 30. NUCOR 35. TRUFER 38. COKE 39. FORBES HALL 40. INDIA 41. MICHOACAN

Max. 755 755 750 750 750 716 694 694

ST 37 CIS Export FOB Black Sea (USD/mt) Min. Max. 500 505 495 505 495 505 495 505 480 495 480 495 480 495 480 495

week 3 week 4 week 5 week 6 week 7 week 8 week 9 week 10

ST 37 Turkey Export FOB (USD/mt) Min. 525 520 515 515 515 510 510 510

Turkish 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. 671 694 739 761 585 595 671 694 739 761 580 595 671 694 750 772 580 595 671 694 750 772 580 595 671 694 750 772 570 585 671 694 750 772 570 580 671 694 750 772 570 580 671 694 739 761 570 580

Cold Rolled Coils

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

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

week 3 week 4 week 5 week 6 week 7 week 8 week 9 week 10

Min. 705 705 705 705 705 650 650 650

Min. 615 615 615 610 610 605 600 600

43. LAKERS 44. ALUMINUM

Down: 2. NORTH AFRICA 3. NSSMC 4. CARGILL 5. MEXICO

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Max. 535 530 525 525 525 520 515 515

Q235 China Local (RMB) including 17% VAT Average 3018 3000 2975 2975 2945 3013 3013 3005

PriceReports

HMS I/II 80:20 HMS I/II 60:40 USA Europe Scrap Export FOB East Export FOB Coast (USD/mt) (USD/mt) Min. Max. Min. Max. 360 365 340 345 week 3 360 365 340 345 week 4 347 350 324 334 week 5 335 340 305 314 week 6 232 330 295 305 week 7 313 320 285 295 week 8 313 320 285 295 week 9 313 320 300 310 week 10

Max. 715 715 715 715 715 670 670 670

6. SUPERIOR 7. COLAKOGLU 11. PIG IRON 12. SOUTHEASTERN 13. WENDT 15. PINNACLE 18. BESSEMER 20. EXHAUST 21. CEBID

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

Max. 625 625 625 615 615 610 610 610

USA domestic mill prices (USD/mt)

Average 635 625 625 625 625 625 625 620

22. BRAZIL 27. KENTUCKY 28. POSCO 29. JAPAN 31. UKRAINE 32. RUSSIA 33. VALE 34. LEEBOW 36. ENGLAND

Min. 849 849 838 838 838 816 805 805

37. MINNTAC 42. CISA

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Max. 871 871 860 860 860 838 827 827

Editor’s Corner

MediaCircus

s I was sitting in traffic recently, clicking through my pre-set radio stations to find at least one that was actually playing music (why do they all seem to go to commercials at the same time?), I caught a snippet of some morning-zoo personality reacting to a caller anecdote by saying, “Not in this economy!” e comment bothered me, but by the time I clicked back to the station, it had already gone to commercial (of course). What economy is that guy living in? Syria’s? e US, circa 2009? Setting aside the assumption that his radio salary probably puts him firmly in the upper-middle class (which gives him shoddy grounds at best to complain about the economy), I couldn’t believe that someone could be so ignorant to economic realities. e unemployment rate in the US is currently 6.6 percent—the lowest level since October 2008 (right before the you-know-what hit the fan). Financial analysts expect the overall economy to grow 3 percent this year, up a full percentage point from 2013. Construction spending is up month-on-month and yearon-year, and other major end-use indicators are similarly rosy. But you wouldn’t know it from listening to certain radio stations and watching certain cable stations and reading certain newspapers and websites. ere seems to be a lot of ignorance to go around in the media at large, ranging from willful exaggeration to outright lies, about the economy, science, culture, and every other significant subject that affects the progress of society. So I began to wonder: is this ignorance genuine—are people really that stupid?—or is it a calculated ploy to rile people up and increase ratings? I’m starting to lean toward the latter, and Obamacare is an excellent example of how ignorance and fear pays. It’s undeniable that the president’s attempt at health care reform has been a national embarrassment. e disastrous website roll-out, the low enrollment numbers, the “you can keep your existing plan” gaffe—Obama’s administration did not

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provide anywhere near enough resources or eﬀort toward ensuring the successful implementation of such immensely significant legislation, and there’s just no excuse for its failure. However, Obamacare is not the Grand Socialist Nightmare some media would have you think. It’s not even a health care plan itself, as its moniker suggests. At its core, it’s a system to aggregate existing health care plans into a single forum, to facilitate the purchase of plans by people who do not already have insurance—in other words, forcing the healthcare market to more resemble a marketplace. Sure, there are subsidies and mandates to contend with, but in the end, the major health insurance companies

are still the ones providing insurance—not the government. And the impetus driving the reform in the first place—if everyone has health insurance, overall healthcare costs will go down—is sound. e fact is, the healthcare system in the US is incredibly flawed and anyone who says otherwise clearly has top-notch, employerprovided insurance that has never given them a single reason to spend hours on the phone disputing a claim payout. Obamacare might not have been the best, most thought-out solution to the crisis, but anyone who insists that the free market can handle it without federal interference is ignorant to the fact that healthcare, unlike many other essential goods and services, does not play by established free-market capitalism rules. It’s an industry that by definition should put the Volume 7; Issue 2

health and care of its clients first—but like most businesses that pit profits against compassion, clients get the short end of the stick every time. And yet, by decrying Obamacare as heralding the US’ rapid slide in socialism, common folk who are susceptible to such fear-mongering tactics have no choice but to tune in. Ratings go up, advertiser dollars roll in, and the only winners are the media CEOs and stockholders, laughing at those poor angry peons all the way to the bank. ere are too many other examples of ignorance-for-profit damaging the evolution of human progress (speaking of, don’t even get me started on evolution deniers), but in the end I’m not that worried, because there’s a counterbalancing force to the well-paid talking heads filling the airwaves with high-calorie BS. e Internet has connected humans in ways that were unimaginable just a couple decades ago. Nightly news anchors and stalwart newspapers are no longer the sole source of information in the world—anyone with an opinion and a blog has a chance of reaching just as many people. e free flow of ideas and perspectives has made the world itself a giant philosophical marketplace, and the more options people have to choose from, the better equipped they will be to discard the useless from the useful, the fearful from the hopeful, and the backward-leaning from forward-thinking viewpoints that are ready to face the future with wide-open minds. SO \

Katie Memmel

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