Compromised capacity utilisation, the influx of cheap imports, and a serious erosion of profitability have forced the closure of several high-profile steel plants in the last three years.
With excess steel flooding the market, steel prices have plunged and a number of regional governments have attempted to stem this tide of negativity with import taxes or energy subsidies.
The problems facing the global steel business are well documented.
The World Steel Association (worldsteel) claimed in October that global steel demand was through the bottom of this cycle amid the escalated uncertainties, though it acknowledged that the steel industry environment remains challenging.
The chief factor still at play is over-capacity, as Adam Parr, Vice-President of Policy & Communications at the Steel Manufacturers Association (SMA), affirmed to gasworld in an exclusive interview regarding the state of the steel sector.
“The greatest challenge facing the steel industry is global over-capacity. At approximately 800 million metric tons, this excess capacity limits the ability of even the most efficient producers to operate profitable, sustainable businesses,” he explained.
North America is one of the major regional markets confronted with this trend. Its steel industry has been the subject of relative demise for several decades now, with the US now the world’s largest importer of the product – embodying the issues facing the market globally.
The SMA is the North American voice of the dominant electric arc furnace (EAF) steel industry, with its members accounting for over three-quarters of domestic steelmaking capacity and employing 60,000 people. In addition, it estimates that its members indirectly generate an additional 420,000 jobs.
Parr confirmed that tackling over-capacity and the consequential effects of this are the biggest concerns facing SMA’s members, but did acknowledge potential upsides going forward if expected investment in US infrastructure is realised.
“SMA members continue to confront the challenges associated with unfairly traded steel imports. This has been an issue in virtually every product line and from a wide range of nations. Unfair steel trade continues to have a negative impact on domestic steelmakers, their employees, investors, and surrounding communities.”
“The domestic steel market is relatively healthy compared to most other regions,” he continued. “Demand has gradually increased since 2008, though it has not yet fully returned to pre-recession levels. A major concern, however, is that the vast majority of this increased demand has been consumed by imported steel products, despite significant unused capacity in the US industry.”
“[But] The SMA is extremely optimistic about the potential large-scale investment in the US infrastructure. This could have a significant near-term impact on domestic steel demand and a long-term impact on the nation’s economic competitiveness.”
“Demand has gradually increased since 2008, though it has not yet fully returned to pre-recession levels. A major concern, however, is that the vast majority of this increased demand has been consumed by imported steel products, despite significant unused capacity in the US industry”
So where does the US steel business go from here?
Despite the high profile glut in the market, Parr points out that the “SMA’s members have survived and in many cases thrived despite extremely challenging economic and political environments” in the past. Further still, the aforementioned impetus in infrastructure investment under the Trump Administration provides a brighter outlook going forward.
“I remain optimistic about the prospects for the industry, and for the electric-arc furnace sector in particular,” he commented. “It is encouraging to see the Trump Administration’s focus on steel priority issues. I am hopeful that President Trump will work with Congress to advance a pro-manufacturing agenda.”
As for the wider market, when asked about the possibility of an OPEC-style agreement to curb global steel capacity and redress the balance in the market, Parr was optimistic that measures – and crucially a desire – already exist to tackle the issues facing this basic industry.
Indeed, Parr was speaking to gasworld en route to Paris for this week’s OECD Steel Committee and World Steel Association leadership meetings. He observed, “By establishing the Global Forum on Steel Overcapacity late last year, numerous G20 and OECD member nations indicated their desire to confront the excess capacity problem that is harming the global steel industry.”
“Success will ultimately require strong, verifiable commitments to major net capacity reductions, and the elimination of policies and support measures that exacerbated the problem, including massive subsidies.”