Though prices have softened slightly in the last few months, carbon plate remains one of steel’s strongest markets, and should remain so, experts say, as long as the U.S. and world economies stay relatively healthy.

Demand for plate is second only to activity in the red-hot beam market, says Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa., noting that the two are related as they both serve the heavy end of steel applications. Apparent consumption of plate, as well as beams, is reaching levels not seen since the early 1970s.

John Anton, director of the steel service at Global Insight, Washington, D.C., contends that plate is perhaps the most consistent and stable of all steel products. Prices of both cut plate and plate in coil have fluctuated little throughout 2007 and remain at about the same level they were two years ago. “While most steel products tend to be going in one direction or another, plate has had no direction but sideways.”

According to Metal Strategies, the price of cut plate has averaged $802 per ton this year, and plate in coil $734 per ton, varying by no more than $5 in any given month. This consistency, especially at such a high plateau, is very positive for service centers, which distribute an estimated 60 to 70 percent of all the plate sold in the U.S.

“The markets we serve continue to be strong, and as far as I can see they will remain strong, both in terms of pricing and demand,” says Lourenco Goncalves, president and chief executive officer of Metals USA Inc., Houston.

Bill Jones, president of O’Neal Steel Inc., Birmingham, Ala., points to a slight softening in orders, largely due to the effect of the housing bust on production of construction and material-handling equipment. But he agrees with predictions that business will rebound in the third quarter.

“As long as corporate profits remain good and capital spending stays strong, the plate market will do well,” maintains Charles Bradford, metals analyst and principal of Bradford Research-Soleil Inc., New York.

“Many markets we service are doing even better than last year,” adds Shelby Pixley, chief executive officer of ArcelorMittal USA Plate, Chicago.

Metal Strategies places apparent domestic consumption of carbon plate at 5.0 million tons through May, up 2 percent from 4.9 million tons for the first five months of 2006. Shipments over the same time period totaled 4.5 million tons, up 4 percent. Continued strength from all three major end-use markets—nonresidential construction (including bridge building), industrial and capital equipment, and energy-related markets—drove the growth in the first half, Plummer notes.

Energy-related applications lead the pack, according to executives at ArcelorMittal and Oregon Steel.

“Our mill is completely full largely due to strong demand for skelp [a strip of plate to be folded and welded] for large-diameter line pipe,” says Scott Montross, general manager for Evraz Oregon Steel Mills Inc., Portland, Ore. While it has taken longer to pick up than other energy tubular markets, line pipe has been absolutely booming for the past 18 months, he adds.

Large-diameter line pipe isn’t the only energy market bolstering plate demand. Construction of wind towers is a new and promising phenomenon, says Pixley. “About 8,000 megawatts of wind energy generation—4,000 towers—will be installed in the next several years.” At 200 tons of plate per tower, he adds, this emerging market is expected to consume an additional 800,000 tons of steel.

Construction of other kinds of towers, including transmission towers and cellular towers, is also a booming application for steel plate, says Jeff Bradley, chairman and chief executive officer of Claymont Steel (formerly Citisteel USA) Claymont, Del.

Meanwhile, the need for rail cars, especially tank cars to transport ethanol, is up as well. “Demand could dip a little, however, because there is not currently enough ethanol being produced to keep up with the new rail cars being built,” Pixley says. That could change quickly, however. With 75 to 100 ethanol plants and other bio-refineries either under construction or expansion, the Renewable Fuels Association predicts that at least six billion gallons of new biofuel production capacity could come online by 2009.

Montross notes there is also tremendous demand for armor plate, particularly due to the development of mine resistant ambush protectant vehicles to replace Humvees. Pixley predicts that plate demand for MRAP and other armored vehicles will persist for a long time, even without the incentive from the war in Iraq.

While the housing slump may have slowed production of smaller construction machinery, demand for heavy mining and construction equipment, which is more plate intensive, has remained robust, executives report. Orders from shipbuilders, at least those overseas, also remain quite strong, says John Tulloch, president of IPSCO Inc., Lisle, Ill. 

In fact, bridge construction is the only plate market that hasn’t performed to expectations, says Pixley. “We had expected a surge with the increased funding in the latest highway bill, but it has been slow to pick up due to funding of the war. But even that market has come back a little in the last few months.”

Compared to most other markets, demand from distribution has been slightly soft, executives report. While the inventory correction that began in last year’s fourth quarter is largely complete, most service centers remain cautious about adding to their stocks.

Some service centers are less concerned about that than others. “I don’t see inventories as a disease,” says Metals USA’s Goncalves. “We use inventories to make money, so I believe having plate inventories is a good thing.”

Most observers agree that plate supply and demand are nearly in balance. While some products, such as quench and tempered and heat-treated plate, are on allocation, most are readily available, with lead times of four to six weeks. Lead times for specialty plate extend almost to the end of the year, however, and orders for pipe skelp reach into the fourth quarter.

Despite the fact that most domestic mills are running almost full out, no one is building new facilities or planning major expansions at this time, says Bradford. ArcelorMittal is expected to restart its long-idled Gary, Ind., plate mill, with a capacity of over 800,000 tons a year, which its predecessor company (International Steel Group) picked up in an asset swap with U.S. Steel in 2003.

“At that time, the plate market was in a trough, so we shut down the rolling mill at Gary while continuing to run the heat-treat line there,” explains Pixley. “In 2005, we reopened a 110-inch mill at Burns Harbor, Ind. Now, with demand continuing to be strong, especially for large-diameter line pipe and wind towers, we decided to reopen the Gary mill.” Large-diameter line pipe and wind towers require wide plate; the Gary mill can roll plate up to 153 inches wide, he adds.

Nucor Corp., Charlotte, N.C., has also increased its plate-making capacity over the last few years, doubling the capacity at its Tuscaloosa, Ala., plate mill, acquired in 2004 from Corus Group Plc, and slightly stepping up the capacity at its Hertford, N.C., mill, Plummer reports. For the most part, domestic mills are looking for ways to increase throughput at existing facilities rather than making significant capital expenditures.

Imports of plate into the United States grew significantly last year, climbing to 3.4 million tons for a 27.5 percent market penetration, up 60 percent from 2.1 million tons and a 20.4 percent penetration in 2005. But the pace of imports has slowed this year, Plummer says. Year-to-date through May, only 1.1 million tons of plate imports were reported, down 16.5 percent vs. the first five months of last year. Import penetration this year through May was back down to 21.5 percent. “That is part of our justification for restarting Gary,” Pixley says. “We want to satisfy demand so that our customers do not have to rely on imports.”

Because the plate market has been so strong worldwide, there haven’t been that many offers from foreign suppliers, at least not at attractive enough prices for service centers and other plate customers to take the risk, he says. Indeed, executives report, prices in some overseas markets are actually higher than in the United States.

Goncalves notes that the current exchange rate is the predominant factor. “It isn’t because the world markets are stronger than the U.S. market. It is because the dollar is so weak. Foreign companies have to be willing to take a haircut to sell into United States. They only sell into the United States if they don’t have any other options.”

While plate prices remain fairly stable—much more stable than hot-rolled sheet—mills and service centers cite some recent downward pressure. Global Insight reports that the price of the more plentiful coil plate fell to $713 a ton in June from $740 in April, while cut plate (also known as discrete plate or plate mill plate) fell to $800 from $810. Anton believes this dip is just temporary. “I think it will reverse and go back up. It could actually reach a record high,” he says, with market fundamentals that could sustain cut plate prices of $850 to $900 and coil plate prices nearing $800 per ton.

Plate’s a Test Case for Globalization
If there were any doubt that the steel industry is becoming more globalized, a look at the recent flurry of international mergers and acquisitions involving domestic plate mills would dispel that uncertainty.

Several international deals were consummated in just the last few months. In July, IPSCO Inc., Lisle, Ill., was acquired by Sweden’s SSAB Svenskt Stal AB. In June, Algoma Steel Inc., Sault Ste. Marie, Ontario, as well as yet-to-be-built slab producer Minnesota Steel Industries LLC, St. Paul, Minn., were acquired by India’s Essar Global Ltd. Oregon Steel Mills Inc., Portland, Ore., was acquired by Russia’s Evraz Group SA in January. The mammoth merger of Mittal Steel and Arcelor SA closed in July 2006, and the company sold its Sparrows Point facility this month.

Such recent transactions are just the latest push in the globalization movement that has accelerated in the past four to five years, says John Tulloch, IPSCO’s president, noting that consolidation has occurred in many sectors of the steel market, not just plate.

“Consolidation is great for everyone, including service centers,” says Lourenco Goncalves, president and chief executive officer of Metals USA Inc., Houston. “It introduces stability into the market.”

Yet this latest wave of activity, with the possible exception of the formation of ArcelorMittal, is not actually consolidation, but mainly a change of ownership, maintains Christopher Plummer, managing director of Metal Strategies Inc., West Chester, Pa. “They have been acquired by strategic buyers that bring something to the table.”

The plate market is actually much more consolidated than the sheet market, with only a few domestic producers left, note various executives. The first surge of plate consolidation came in the late 1990s when some inefficient, geographically challenged capacity—including Geneva Steel and Gulf States Steel—was taken out of the market. Then Charlotte, N.C.-based Nucor Corp. and IPSCO added new capacity, followed by a wave of domestic consolidation and, more recently, the investment in the U.S. by foreign mills.

Anton says this foreign investment has been partly accelerated by the weak U.S. dollar, which makes U.S. assets more affordable. “Also, because of the value of the dollar, U.S. steel companies are likely to be more profitable over the long term,” he says.

“There is nothing new about foreigners buying U.S. mills,” Goncalves says. “We have the best economy in the world, and being a participant here is a blessing.”

Each acquisition had its own specific set of motivating factors. Tulloch says SSAB wanted to expand its offering of high-value steels, including heat-treated and tubular products, “and a significant amount of our business is in value-added areas.”

In the case of Oregon Steel (now called Evraz Oregon Steel Mills Inc.), being owned by Evraz “allows us to be part of a bigger organization with global reach, as well as giving us access to a supply of slabs,” says Scott Montross, the company’s general manager.

Algoma, according to Shashi Ruia, Essar’s chairman, provides the Indian company with an opportunity to expand into the North American market.

How will this globalization trend affect the domestic plate market? Some contend it is too early to say. Others are unconcerned. “I really don’t think it will have an impact,” says Jeff Bradley, chairman and chief executive officer of Claymont Steel, Claymont, Del., which was recently spun off by private equity firm H.I.G. “Just the names have changed,” he says.