(L to R) US Trade Rep. Katherine Tai, Phil Bell – President of the Steel Manufacturers Assn. in Washington DC

Two issues that were widely discussed at the recent Global Steel Dynamics Forum (GSDF), organized by the World Steel Dynamics and the Association for Iron and Steel Technology in New York, were the Biden administration’s upgrading of the infrastructure and its impact on steel industry’s outlook, and secondly the theme of decarbonization in the process of steel production.

The speakers at the forum were also generally bullish about the industry, keeping in mind that the North American market was “about to reach a peak driven by several determinants, including the huge infrastructure allocations, demand from cleaning up the energy grid, a surge in automotive manufacturing, further decline in imports …. all the factors will prop up the American industry”, as Dirk Schulz, a visiting German steel analyst put it.

U.S. Congressman Frank J. Mrvan, vice chair of the Congressional Steel Caucus, took stock of the steel industry’s current situation, dwelling on the future of the steel industry, CO2 emissions in production and, “more importantly”, as he said, about creating a level-playing field and other pieces of legislation put forth to Congress to protect the steel industry. Mrvan’s congressional district in Indiana is home to Cleveland-Cliffs’ East Chicago facilities and has a large population of retirees and steel workers. Mrvan said imports subsidized by foreign governments are a threat to the U.S. industry – a veiled reference to China.

Ryan Sweet, chief U.S. economist at Oxford Economics

Level the Playing Field Act

He said that this was the reason for supporting the bipartisan Level the Playing Field Act, which would grant the U.S. International Trade Commission (ITC) more flexibility in adjudicating cases and speed up the process.

“This bipartisan effort is to make sure that the steel industry continues to thrive,” Mrvan said.

With the push toward vehicle electrification and renewed investment in infrastructure, the U.S. steel industry is poised to break out of the long-standing demand stagnation, Lourenco Goncalves, the chief executive officer of Cleveland-Cliffs Inc. said.

Goncalves also warned that attempts to side-step trade laws and USMCA (United States, Mexico, and Canada) content requirements through Mexico are a problem.
“The USMCA is being exploited. That ‘M’ (in USMCA) is not a license for dumped things to come to the U.S. through Mexico.” U.S. Steel producers have been voicing concern that Mexico was being used by China and other countries to ship their excess steel into the U.S. which has a free market arrangement with Mexico and Canada.

While acknowledging that transshipments to the U.S. via Mexico were a problem, Maximo Vedoya, Ternium’s CEO, responded that it was “not an exceptionally acute problem and one that is shared between the three USMCA countries”.

“We know we have some problems, but the U.S. has the same, or bigger problems,” said Vedoya. Mexican authorities, he pointed out, were working to address transshipments, adding that the problem required close cooperation among the USMCA governments and industry.

U.S. Sen. Joe Manchin, a West Virginia Democrat who chairs the Energy and Natural Resources Committee, said at the GSDF that Congress and trade officials were keeping “a very close eye” on the Mexico transshipment issue.

“We’re watching that very closely. We’re going to be very careful of what is coming in the back door of our own country. We need (Mexico) to be a reliable partner,” he said.
But the USMCA, on the whole, has been a positive factor for North America and its steel producers, according to Alan Kestenbaum, executive chairman of Stelco Inc.
“The USMCA has been a resounding success,” he said. “Despite some holes, I think it is encouraging companies to come and invest millions and millions of dollars in (new North American facilities).”

Making a presentation on the “Global Economic Outlook”, Ryan Sweet, chief U.S. economist at Oxford Economics, said his firm believed the global economy is likely to tip into a mild recession late this year or early next year.

Sweet said the global economy is expected to contract as central banks raise interest rates to fight inflation. Likely, he said, “they’ll overcorrect”. However, recessions brought on by monetary policy errors tend to be short in duration and limited in severity. In other words, it would be a condition of high inflation amid low unemployment, a case of soft landing.

Decarbonization which did not receive so much attention in the past, was discussed at great length at the conference. John Lichtenstein, the WSD’s managing partner, predicted the global emissions in the industry in its entirety would decline by 13% between 2019 and 2030. He also expected a significant drop in Chinese production combined with an increase in the share of electric arc furnace (EAF) production.

Nucor’s chief executive Leon Topalian pointed out that original equipment manufacturers and the automotive industry were emphatically demanding a “cleaner product”.

Topalian emphasized that green steel products were an important part of the company’s product portfolio. Green steel, he added, was becoming “incredibly important”, especially for the automotive and higher-end manufacturers. “(Those) segments are demanding cleaner and cleaner steels and wanting a true net-zero product.”

Topalian reminded of Nucor’s green steel offering Econia, launched in 2021; it delivered its first Econia coil to General Motors in 2022, with the company now expecting to deliver more than 1 million tons in the next 12 months. Demand for it was growing, he said, adding that while steel users kept demanding green steel, steel producers were demanding people who could make it.

While many participants at the GSDF saying that supply chains were almost back to normal in terms of activity, inventories, and seasonality, some felt that uncertainties in both the government policy and risks therefrom would continue in the second half of 2023 as firms start to implement long-term supply chain restructuring plans.

Disruptions during the pandemic were manifested in shortages and delayed deliveries of a wide array of goods made with steel, including home appliances, television sets, furniture, machinery parts/components, etc. That caused disrupted shipping patterns which, according to shipping experts, now appear well on the way to being corrected.

Some steel industry representatives said they were following the moves made by the EU and U.S. which are in the process of negotiating an agreement on tariffs to be applied on steel and aluminum based on the greenhouse gas emissions of production. The European Commission (EC) has indicated a deal could be completed by October. Asian steel representatives at the GSDF were also curious to know to what extent the low water levels in the Panama Canal were restricting ship movements from Asia to the Atlantic basin.

Philipp Bell, the president of the Steel Manufacturers’ Association (SMA) told the American Journal of Transportation that he supported the Biden administration’s steel policy which was very helpful to the steel industry. The tariffs, he said, would contribute to a level-playing field. “I am confident that it (the administration’s policy) is helping strengthen our industry and creating well-paying steel jobs,” he said.

Separately, steel executives met at the annual conference of members of the SMA, and the Metals’ Service Center Institute held under the slogan “Building the World Together” in Washington. Politicians, including the U.S. Trade Representative Katherine Tai, also attended the event; in her address, Tai outlined to the audience, who included top steel executives, the principles that guide her while negotiating trade deals like the Global Arrangement on Steel and Aluminium. Tai, who was introduced to the audience by the Nucor chairman/president Leon Topalian, sat down for an exchange of views with SMA President Bell.