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A more consolidated US steel sector has quickly emerged in the last two years, although many agree that there is still some way to go. There is now greater productivity and more market discipline, reports Myra Pinkham.
Weher or not it was prompted by the Section 201 tariffs, the present North American steel industry is very different to that of 2002, at the onset of the import duties. Industry consolidation, especially by flat-rolled producers, has taken a very fragmented industry and created three large, more efficient steelmakers - dubbed the Big Three by many - and a stronger, more efficient industry overall.
This transformation, however, is not over yet. "If the object is to change the dynamics of the industry, there hasn't yet been enough change," maintains Peter Wright, vp of marketing for long products mini-mill TXI Chaparral Steel, Midlothian, Texas, who states that there are sectors of the industry that are still very fragmented. Jon Ruth, president of North Star Steel, Minneapolis, agrees, calling the restructuring "a work in progress which, while it has made good progress, is not complete."
"What consolidation has occurred has been companies snapping up low-priced assets," Wright states, which does not necessarily help the industry as the end result is the restarting of shuttered capacity.
Christopher Plummer, managing director of consultants Metal Strategies, West Chester, Pennsylvania, confirms this, noting that since 2000, when North American steelmakers started closing plants, the number of companies operating in flat-rolled declined by only about 7% and capacity fell only 6.5%.
This is not to say, however, that consolidation hasn't had a positive impact. "It has put the pricing issue into the hands of fewer people who are more cognizant of costs," says Scott Montross, vp of sales and marketing for Oregon Steel Mills, Portland, Oregon, noting that the industry leaders - International Steel Group (ISG) of Cleveland, United States Steel Corp of Pittsburgh and Nucor Corp of Charlotte - are doing things now to be sure that they make money later.
"For years prices were only good until companies needed to fill their order books. Now there is more pricing discipline," Montross says. And that is a good thing, declares Keith Busse, president and ceo of Steel Dynamics of Butler, Indiana:...