From port congestion and infrastructure bill to “Green Steel” – SSS Conference in Miami tackles a myriad of issues affecting steel industry and trade

U.S. President Joe Biden’s announcement about passing the much-discussed infrastructure bill coincided - almost - with the opening of the Steel Success Strategies (SSS) 2021 conference, held from Nov. 7 to 9 in Miami.

The conference, which had top executives of major steel companies such as Nucor, U.S. Steel, Cleveland Cliffs, etc. as speakers, discussed a myriad of issues of interest to the steel trade and industry, ranging from steel tariffs through congestion at U.S. ports and modernization of infrastructure to reducing carbon emission in steel production.

Many delegates applauded President Joe Biden for the bipartisan infrastructure bill which he had described as a “once-in-a-generation investment that’s going to create millions of jobs, modernizing our infrastructure – our roads, our bridges, our broadband … to turn the climate crisis into an opportunity”.

The infrastructure investment will also include modernization of ports and airports; President Biden declared that he would visit some of the ports. Developing freight rail will also be promoted to remove the bottlenecks in distribution of goods. “It’s going to make it easier for some companies to get goods to markets more quickly and reduce supply chains’ bottlenecks now and for decades to come,” he said, reminding that America’s infrastructure used to be rated as the best in the world. “Today – according to the World Economic Forum, we rank 13th in the world.”

The steel industry has praised the infrastructure bill with Kevin Dempsey, the President/CEO of the American Iron and Steel Institute (AISI), describing the sentiment within the steel industry as “very supportive” of it. “The bill will provide the much-needed finance for infrastructure development,” he told the American Journal of Transportation.

“Passing this bill provides a tremendous boost to our industry, as demand for American steel could increase by as much as five million tons for every $100 billion of new investment,” he said.

While the infrastructure bill will create jobs and is emphatic about using steel produced in America under the “Buy America” slogan, steel-consuming industries are worried that locally produced steel, which is more expensive than imported steel, is causing a rise in costs. Dempsey argued that “steel prices are driven by steel demand just as we have seen the rise in prices of other products”.

Some delegates wondered if the Biden administration would rescind the Trump administration’s decision to withdraw from the Trans-Pacific Partnership (TPP), a trade pact of 12 nations, including the U.S. in the Indo-Pacific region. The TPP, a pet project of the Obama administration, was aimed to support America’s pivot to Asia. However, after President Trump’s withdrawal from the TPP, Japan took the lead and cobbled together with the remaining nations the trade pact’s new avatar called the Comprehensive & Progressive Agreement for the Trans-Pacific Partnership (CPTPP).

“I personally don’t think the U.S. will move to join the CPTPP …” Dempsey said when asked if President Biden would join the trade pact now.

The Miami event also afforded representatives of both U.S. and foreign ports an opportunity to exchange views on various aspects of the steel business with steel producers, traders and service providers. Besides representatives of the Port of Brownsville (PoB), Texas, and other U.S. ports, the delegates included representatives of foreign ports, shipping companies and exporters who wanted to get a clearer picture of the heavy congestion at ports, causing supply chain disruptions.

Shippers also face shortage of containers needed to fill in with merchandise for shipment.

Besides attracting steel industry representatives from India, China, Japan and Korea, the Miami event also had representatives of some steel companies based in the Gulf Cooperation Council (GCC) states that are trying to increase their presence in the world markets. .

Al Ghurair Iron & Steel LLC, (AGIS) is the largest flat steel rolling and hot-dip galvanizing complex of the GCC region. Located in Abu Dhabi, United Arab Emirates (UAE); the company, with its 500,000 TPA facility caters to the requirement of the construction, fabrication and other non-automotive industries primarily in the Middle East and North Africa (MENA) region. AGIS is a joint venture of the Al Ghurair Group, UAE and Nippon Steel Corporation, Japan.

An upbeat Sadashiv Shetty General Manager (Commercial) of Al Ghurair, told the American Journal of Transportation, that the 2020/21 (fiscal) year was a “good year with robust demand in the construction sector … besides the construction sector, there was good demand in air-conditioning, generating strong demand for steel. The GCC markets absorb some 60% of our exports while the remaining 40% of our exports go to the rest of the world, of which the U.S. absorbs some 20%,” Shetty said.

Section 232

While the big supplying nations such as China, India, Japan, Korea, etc. faced hurdles like the steel tariffs imposed under Section 232 of the Trade Act, the Gulf based companies made adjustments to deal with the tariffs.

“Yes, we were affected by Section 232 steel tariffs. However, our customers (in the U.S.) have got used to it because the U.S. is still a net importer of galvanized steel,” Shetty explained. However, his company also had to reduce its profit margin to deal with the situation and continue to offer products at competitive prices.

Supply chains have been affected because of shipping delays and distribution bottlenecks. “Shipping has turned out to be a big challenge today … and this is not about supply and demand. Indeed, demand is not even a major problem, it is a shipping problem which, in my personal view, will remain until end of 2022,” Shetty maintained, adding that demand was robust and this was also reflected in the upbeat mood among many representatives of steel companies at the Miami event.

Port traffic has been hit in other regions as well. Southeast Asia’s ports were worst affected in the past six months. “And the tight port traffic could create even greater disruptions in the supply chains,” an Asian supplier, speaking on condition of anonymity, said.

For example, ports in Shenzhen and Hong Kong, which are major points for hi-tech product traffic between southern China and the rest of the world, had faced massive congestion for weeks and it would take a long time to ease, exacerbating the disruptions in the global supply chain. He had learned from shippers that it was taking some 73 days – about 84% - longer than the pre-pandemic period for shipments from Asia to U.S. ports, raising doubts whether the merchandise would arrive in time for the Christmas shopping season.

Congestion at Asian and U.S ports has also increased the turnaround time, with cargo ships having to wait for weeks at both the points of origin and destination. This has resulted in an unprecedented shortage of shipping containers worldwide.

Some delegates privately expressed fears that the congestion could possibly last until spring 2022 while others feared that the shipping crisis could last much longer.

Shipping routes in other regions have also been affected, with the pandemic exacerbating an already flummoxed situation, with cargo volumes on the crucial Mediterranean route for sea trade between China and Europe dropping 14 percent end September over the year-earlier period.

The Institute for Economic Studies of Kiel, Germany, recently said that the continuing congestion at important container ports worldwide could lead to a stagnation in global trade; this situation has triggered a spiraling of transport costs by up to ten times the freight costs, particularly between Asia and Europe.