AISI Report Warns of Competition
from 'Indirect' Steel Imports
Import Levels Decline,
But Remain High
MSCI: Steel, Aluminum Shipments,
Inventories Slide in U.S., Canada
SSINA: Specialty Steel Imports
Up 13 Percent Over 2006
CBSA: Red Metal Shipments
Trail Last Year by 6.7%
IISI: World Steel Use on the Rise
Briefs

AISI Report Warns of Competition
from ‘Indirect’ Steel Imports
U.S. indirect steel imports hit a new high of 39.8 million net tons in 2006—up 8 percent from 2005 and up 22 percent since 2000. U.S. indirect exports of steel also reached a new high of 20.6 million tons in 2006, a 2 percent gain from 2005 and up 15 percent from 2000. Since indirect import gains outpaced the rise in indirect exports, the indirect steel trade deficit worsened in 2006 to 19.2 million tons—15 percent greater than 2005 and only 4 percent below the record year of 2002, according to the latest report from the American Iron and Steel Institute, Washington, D.C.

The report, updated to include 2006 data, identifies the volume and value of steel incorporated in finished products in eight major consumer markets imported and exported between the United States and 11 major countries and four regions.

America’s enormous, growing deficit in indirect steel trade serves as an ongoing warning about the increasing long-term challenges facing domestic manufacturing, say AISI officials. For the automotive sector—which remains the single largest source of indirect steel imports—the indirect steel trade deficit grew to 9.5 million net tons in 2006, after being relatively stable in 2003-2005. However, while the indirect steel trade deficit for this sector rose modestly from the 2003-2005 sector average of 8.7 million tons, the indirect steel trade deficit in 2006 remained well short of the sector’s record deficits in 2001-2002. This decline reflects in part the increasing automotive production in the United States, largely by foreign producers such as Toyota, Nissan, Honda and Hyundai, which have significantly expanded the scope and scale of their U.S. operations. These companies rely mainly on domestically produced steel.

While the automotive sector’s indirect steel deficit since 2002 is one positive development, the significant overall deficit in America’s indirect steel trade highlights continuing structural problems for U.S. manufacturing. Of particular concern to domestic steelmakers is the fact that U.S. indirect steel imports from China last year increased 20 percent from the level in 2005. Moreover, America’s 5.5 million ton indirect steel trade deficit with China in 2006 was the largest deficit with any country, and was 3.9 million tons greater than in 1999.

“China has the world’s most heavily subsidized steel industry and a huge excess of inefficient steel capacity. Its mercantilist model of government subsidies, currency misalignment and export-led growth extends well beyond steel to include downstream producers throughout the Chinese manufacturing base. Because no U.S. manufacturer, regardless of how efficient it is, can compete against the Chinese government, this model of economic development represents a growing threat to the U.S. steel industry, the American manufacturing base and U.S. national security,” says Andrew G. Sharkey, III, president and CEO of AISI.

“AISI joins with other U.S. industries in urging the adoption of a pro-manufacturing U.S. policy that has at its core more effective laws against unfair trade. The place to start is with passage into law this year of strong China trade legislation,” he adds.

Import Levels Decline, But Remain High
The United States imported 2,196,000 net tons of steel in September—down 17 percent from the previous month. Those imports included 1,876,000 net tons of finished steel, down 9 percent vs. August, reports the American Iron and Steel Institute, Washington, D.C.

While overall imports year-to-date have declined vs. the all-time record year of 2006, total and finished steel imports, on an annualized basis, remain up 8 percent and 11 percent, respectively, vs. 2005, which also saw historically high import levels. On an annualized basis, total imports of steel in 2007 would be 34.6 million net tons, according to AISI.

Among the products showing large increases in September vs. the prior month were: sheets and strips all other metallic coated, up 146 percent; tin plate, up 28 percent; and cut-to-length plates, up 11 percent.

Year-to-date imports of pipe and tube, driven largely by China, remain at very high levels. For example, line pipe imports are up 60 percent vs. 2006, AISI said.

In September, the five largest suppliers of finished steel from offshore were China (264,000 net tons, down 28 percent vs. August), South Korea (161,000 net tons, up 12 percent), Brazil (110,000 net tons, up 130 percent) Japan (92,000 net tons, down 41 percent) and India (79,000 net tons, up 14 percent).

“Despite modest declines in overall import levels in recent months, we are still looking at an import year in 2007 at or above the 2005 level and a relatively high steel import penetration of 23 percent year-to-date,” says Andrew G. Sharkey, III, AISI president and CEO. “Efficient, market-based U.S. producers of steel and many other manufactured products remain concerned about China trade and dumped and subsidized imports. General trends in global trade clearly indicate that America’s critical trade remedy laws need to be defended in multilateral negotiations and enhanced in domestic legislation.”

MSCI: Steel, Aluminum Shipments,
Inventories Slide in U.S., Canada
Demand for metals in the United States and Canada softened further in September, and service centers continued to reduce inventories to bring supplies into better alignment with the weaker-than-expected economy and seasonal low order rates, according to the latest Metals Activity Report from the Metals Service Center Institute, Rolling Meadows, Ill.

In some cases, inventories reached five-year lows. September shipments of both steel and aluminum declined from year-ago levels in both countries.

Steel product activity
Shipments of steel products from U.S. service centers totaled 4.02 million tons in September, down 8.1 percent from September 2006 and the 13th consecutive month of year-over-year shipment declines. Year-to-date steel shipments of 40.1 million tons were 7.9 percent lower than the first nine months of last year. Canadian steel shipments of 296,100 tons were 8.9 percent below year-earlier totals, marking their 14th consecutive month of year-over-year declines.

Canadian steel shipments during the first nine months of the year totaled 2.8 million tons, down 8.1 percent from the 2006 period.

At the end of September, U.S. steel product inventories totaled 12.56 million tons, the lowest level since November 2005 and 24.3 percent lower than inventories in September 2006. At September shipping rates, that represents a 3.1-month supply.

Canadian inventories of 1.13 million tons were 23.4 percent lower at the end of September than a year earlier, but at those shipping rates still represented a 3.8-month supply.

Aluminum product activity
September shipments of aluminum products from U.S. service centers totaled 89,000 tons, down 16.1 percent from September 2006 and the lowest level since last December. Shipments for the first nine months of the year totaled 886,100 tons, 5.4 percent lower than the 2006 period.

In Canada, aluminum product shipments of 10,700 tons were essentially flat, off 0.1 percent from a year ago. Year-to-date shipments were off 3.5 percent at 92,100 tons.

U.S. aluminum inventories at the end of September totaled 272,000 tons, down 29.9 percent from a year ago and at the lowest level since June 2002. At September shipping rates, aluminum stocks represented a 3.1-month supply.

In Canada, aluminum inventories of 26,700 tons slipped to their lowest level since June 2004 and were down 18.6 percent from last year. At September’s shipping rates, Canadian aluminum inventories were sufficient to last 2.5 months.

SSINA: Specialty Steel Imports
Up 13 Percent Over 2006
Year-to-date imports of total specialty steel through June—including stainless steel, alloy tool steel and electrical steel—totaled 524,773 tons, a 13 percent increase compared to the first half of 2006. U.S. consumption totaled 1,473,690 tons, a 4 percent decrease, while six-month import penetration hit 36 percent, a six percentage point increase, according to the latest data from the Specialty Steel Industry of North America, Washington, D.C.

Following is year-to-date data for individual product categories:

• Stainless steel sheet/strip: Imports were 227,443 tons, a 6 percent decrease; U.S. consumption was 800,972 tons, a 13 percent decrease.
• Stainless steel plate: Imports were 79,525 tons, a 74 percent increase; U.S. consumption was 201,373 tons, a 22 percent increase.
• Stainless steel bar: Imports were 65,004 tons, an 18 percent increase; U.S. consumption was 123,813 tons, an 11 percent increase.
• Stainless steel rod: Imports were 16,796 tons, a 14 percent increase; U.S. consumption was 35,054 tons, a 7 percent increase.
• Stainless steel wire: Imports were 23,696 tons, a 1 percent decrease; U.S. consumption was 41,440 tons, a 4 percent decrease.
• Alloy tool steel: Imports were 52,275 tons, reflecting no change; U.S. consumption and import penetration were not calculable.
• Electrical steel: Imports were 60,035 tons, an 87 percent increase; U.S. consumption was 227,930 tons, a 2 percent increase.

CBSA: Red Metal Shipments
Trail Last Year by 6.7%
For the first nine months of 2007, shipments of copper and copper alloy products were down 6.7 percent, reports the Copper and Brass Servicenter Association, Wayne, Pa.

Though service center shipments of coppermetal products in September appear to be down 12.7 percent from the previous month, CBSA officials note that there were only 19 shipping days in September vs. 23 in August. The average daily shipping rate month to month actually increased by 5.7 percent, though it was still down slightly compared to September 2006.

IISI: World Steel Use on the Rise
The Brussels-based International Iron and Steel Institute forecasts that 2007 will be another strong year for the steel industry with apparent steel use rising from 1.12 billion metric tons in 2006 to nearly 1.2 billion tons in 2007, an increase of 6.8 percent. Latest projections for 2008 suggest a similar global growth rate.

The BRIC (Brazil, Russia, India and China) countries, which accounted for about 41 percent of global steel demand in 2006, will again lead the growth with an expected increase of 12.8 percent for 2007 and 11.1 percent for 2008. Overall, 77 percent of world growth in 2007 and 71 percent in 2008 will take place in BRIC countries, IISI estimates.

China’s apparent steel use is expected to grow by 11.4 percent in 2007 and 11.5 percent in 2008, accounting for 35 percent of the world total.

For India, forecasts for apparent steel use point to an increase of 13.7 percent in 2007 and 11.8 percent in 2008.

Very positive developments are forecast for the Russian market, where growth of 25 percent for 2007 and 9.5 percent for 2008 are led mainly by the energy and construction sectors.

Apparent steel use in Brazil is expected to increase by 15.7 percent for 2007 and 5.1 percent for 2008, with strong fixed capital formation partly driven by public investment programs.

In the EU, the growth in steel demand supported by healthy developments in Germany is mitigated by adjustments in the inventory positions, leading to a growth of 4 percent in 2007 and 1.4 percent in 2008.

For 2007, steel demand in the NAFTA region appears less robust than previously anticipated, particularly in the residential construction sector. A negative contribution to growth also derives from inventory reductions. In 2008, improved prospects for the overall market conditions lead to positive forecasts of 4 percent growth.

“Although global economic risks have increased, the IISI forecast assumes that the recent credit market volatility will not move the U.S. economy into recession. We are pleased to note that North Africa, South Africa and the Middle East are emerging as strong growth regions as higher energy and raw material prices associated with growth in China, as well as other developing nations, increase income and boost investments in these regions,” says John Surma of U.S. Steel, IISI chairman.

Briefs
Consuming Industries Trade Action Coalition Executive Director Steve Alexander criticized the recent U.S. International Trade Commission decision to extend protective duties on hot-rolled steel from six of the 10 countries under review, saying that the duties had “outlived their usefulness” and were damaging to American steel consumers. The ITC voted to continue AD/CVD duties on China, India, Indonesia, Taiwan, Thailand and Ukraine, and to terminate the duties for Argentina, Kazakhstan, Romania, and South Africa. The remaining duties will be left in place until the next ITC review in 2012.

“Today the U.S. steel industry by its own admission is healthy and will continue to be profitable for the foreseeable future while America’s steel consuming industries, who employ nine million Americans, are struggling with steel supply problems and high prices,” said Alexander. “The AD/CVD duties on hot-rolled steel are no longer necessary and are making it difficult for U.S. manufacturers to compete with their global competitors.”

The October 2007 Precision Metalforming Association Business Conditions Report indicates that metalforming companies expect a slight dip in business conditions during the next three months. However, the number of companies with a portion of their workforce on short time or layoff decreased significantly in October. “While expectations for current shipments are only modestly improved over one year ago, expectations for new orders over the next few months and the overall assessment of the general economy are substantially more positive than last year,” says William E. Gaskin, PMA president.

Kevin M. Anton, vice president of Alcoa and president of Alcoa Materials Management, has been elected chairman of the board of The Aluminum Association, Washington, D.C. Anton succeeds Patrick M. Franc, president of ARCO Aluminum. Anton’s two-year term begins January 1, 2008.

October’s report from the Federal Reserve that manufacturing production showed no change in September after edging down 0.4 percent in August does not accurately reflect what is going on in manufacturing,” says David Huether, chief economist of the National Association of Manufacturers in Washington, D.C. “While overall manufacturing activity was flat last month, there’s an awful a lot of activity under the surface. Overall, manufacturing production rose at a healthy 4.3 annual rate in the third quarter of the year. This is an encouraging sign for the overall economy and signals that despite the recession in the housing market, the overall expansion remains on track.”