Domestic steel's image

October 18, 2007
By: Vicki Bell

Last week, I had the pleasure of attending a dinner and presentation hosted by the Outside Processors Council (OPC). The council, organized in 1997 with the assistance of the American Iron and Steel Institute (AISI) Outside Processing Managers Committee, serves metal producers, service centers, and distribution companies.

The event was part of OPC's Inaugural Scholarship Golf Classic held at the Marietta Conference Center & Resort, Marietta, Ga., practically in my backyard, as the crow flies, but considerably farther away timewise, because of traffic congestion in metro Atlanta. The fundraiser supports a $5,000 scholarship awarded to a student in metallurgical studies or engineering.

The evening was well worth the drive—good food, great people, a worthwhile cause, and an extremely interesting presentation about the domestic steel industry delivered by David C. Jeanes, AISI senior vice president, market development.

Domestic metals producers aren't the most beloved entity in the U.S. metal fabricating industry. For the past three years, the Fabricating Update e-newsletter has surveyed its subscribers about metal manufacturing's greatest concerns. The No. 1 concern all three years has been steel prices. Many survey respondents have shared their thoughts about what they believe are inflated domestic prices and trade policies that hamper fabricators" ability to be competitive with foreign manufacturers.

The general perception among many fabricators is reflected in this response to the Oct. 11, 2007, issue of Fabricating Update's sister e-newsletter Stamping News Brief that discussed U.S. scrap metal being sent to China: "I am up [to my eyeballs] with disgust at the position that the steel-consuming sector has been forced into. We can buy only from domestic mills—mills that have antiquated equipment, specs, manufacturing methods, and have no incentive to improve or become more competitive. The mills do not care if all the raw materials and scrap steel leave the continent. This gives them only another excuse to raise prices and lower the quality of steel in the marketplace. Why are we forced to deal with lamination, camber, inclusions, pickle stains, and formability issues?"

The author of these comments works for a Michigan automotive parts supplier. Accurate or not, this is the perception among steel consumers, and this perception doesn't do much for supply-chain relationships. Longtime beliefs also are difficult to overcome.

Jeanes briefly acknowledged the image problem that goes beyond steel fabricators. "The public puts baggage on domestic steel, but there's a lot going on behind the scenes," such as environmental improvements. According to Jeanes, the industry has a barrel-a-ton goal—take a barrel of energy out of every ton of steel produced. So far this initiative has reduced energy demand by 45 percent and air and water emissions by 90 percent. Recycled steel use has grown to 68.7 percent.

Jeanes also acknowledged that the steel industry is "very dependent on downstream industries" and "began collaborating with the auto industry years ago to address commonalities." This collaboration, the Market Development strategy, was extended to the construction and container industries. Among AISI's many market development partners are Ford, GM, Chrysler, Caterpillar, John Deere, Hormel, and General Mills.

Examples of the Market Development initiative cited in "A Message to AISI Members, Partners and Customers" in the association's Market Development progress report 2006  2007 are: "Equipping automotive OEMs to produce the next generation of steel-intensive vehicles; developing cost-effective steel design and construction techniques; driving new market demand in residential construction; and reversing a decline in tinplate sales by changing consumers' attitudes about canned food."

Will the reduced energy costs and collaborative market development efforts lead to more competitive domestic steel prices? Or will a shift in thinking about the North American steel industry based on its environmental efforts and higher-quality products compared to Chinese steel (Read Chinese steel targeted) make the higher prices more palatable? Are these possibilities more probable than the global playing field being leveled in the near future? Will steel prices be fabricators' No. 1 concern in 2008?

Vicki Bell

Vicki Bell

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8209