How does this legal action suit you?

November 13, 2008
By: Dan Davis

We get plenty of magazines delivered to the office. It helps us stay abreast of other manufacturing segments and the steelmaking and distribution business.

In the October 2008 edition of Metal Center News, I came across Editor-in-Chief Tim Triplett"s editorial on three lawsuits filed against eight of the largest steel producers in the U.S.: AK Steel Holding Corp., ArcelorMittal USA, Commercial Metals, Gerdau Ameristeel Corp., Nucor Corp., SSAB Swedish Steel Corp., Steel Dynamics Inc., and U.S. Steel Corp. The suits, filed by Wilmington Steel Processing Inc., Philadelphia; Standard Iron Works, Scranton, Pa.; and Supreme Auto Transport LLC, Oakland County, Mich., claim
that the steelmakers are involved in alleged price fixing.

Triplett has his doubts that these lawsuits will result in any legitimate action taken against the mills. It seems
far more plausible to me that the appearance of collusion comes from companies acting independently, but responding
similarly, to like market conditions, he wrote in the editorial.

He"s probably right. That"s just the shape of the global steelmaking landscape today.

For example, in early November ArcelorMittal, the world"s largest steelmaker, announced that it was cutting output at its plants by as much as 35 percent in the fourth quarter to combat the huge decreases in demand from customers such as construction firms,
automotive companies, and appliance manufacturers. Just what does that mean to the global steelmaking supply chain Well, ArcelorMittal produces about 10 percent of all steel available in the world. For a company that"s triple the size of its nearest competitor, Nippon Steel, you can see how they might be able to impact overall steel prices with a simple announcement.

I don"t see any type of backroom conspiracy where these steel executives are sitting in leather-bound chairs around
a huge table, glasses of cognac in one hand and big stogies in another, talking about steel prices. I see companies with more modern technology and flexible work forces who are able to shut down or slow manufacturing operations
instead of just maintaining production at one certain level and riding the peaks and valleys of a volatile steel-consuming market.

That"s not great news for metal fabricators, who still yearn for the days of $200-per-ton pricing of the 1990s. In
fact, the Fabricators & Manufacturers Association conducted an informal survey of close to 600 metal fabricating visitors to its booth at the 2008 FABTECH® International & AWS Welding Show and found that the No. 1 concern of those surveyed was rising material prices, ahead of finding skilled workers and the general state of the economy.

Metal fabricators may get some relief in 2009. Alexandre Weinberg, an analyst at Petercam in Brussels, told The New York Times that steel prices next year would average about 30 percent below the average prices commanded in the 2008 market. STAMPING Journal Editor Kate Bachman is getting similar feedback for a materials forecast article she is working on; one
source indicated that prices could fall to about $600 per ton early in 2009.

Any relief in today"s tumultuous economic times would be very welcome.

Dan Davis

Dan Davis

FMA Communications Inc.
2135 Point Blvd
Elgin, IL 60123
Phone: 815-227-8281