Data centers, infrastructure and power will be the drivers of the steel economy in 2025, Barry Zekelman said during an October SMU Community Chat.
“In energy policy, we know we need more power. You’re already hearing restarts of nuclear and other talk of micronuclear. There’s just a whole new ball game going on and we’ve got to grow the power supply here massively,” said Zekelman, the chairman of pipe and tube manufacturer Zekelman Industries.
However, he cautioned against expecting immediate help from the Federal Reserve.
“I don’t think rates are going to drop quite as quickly as people were thinking. I think that at best you might see a point through next year and that might be a little bit wishful thinking because I think inflation is still pretty sticky at a consumer level and at a wage level. I think 2025 could be a little bit of a bumpy ride.”
At the more micro level, Zekelman expects 2025 to be a pause year for his company. “We’re finishing off all of our CapEx, we’re getting it all up to speed. We’re kind of taking a little breather to kind of reset.”
On the pricing front, he said numerous factors have led to past volatility, though he anticipates less of that for the next 15 months. He anticipates the HRC price to trade in a fairly narrow band through the end of 2025. “I think that will be a band that is decently profitable for the mills, which it should be. I don’t think it gets too high or out of whack because we’re looking at displacements from other countries that have steel available that are being displaced by China moving steel into their markets. You have to be cognizant of that.”
Zekelman makes no mistake about what he wants to see in pricing. “I want to see it traded in a healthy band, a range where the mills could make money, where we can produce more domestic product, where we could take care of our customers, where we could take care of our teammates and our communities and run our plants at an efficient rate. I think we’re going to trade in that healthy range for 2025.”
When it comes to trade policy, one of his favorite topics, Zekelman said any protective measures have to be broad-based for true effectiveness. Trade policy that levels the playing field for hot-rolled coil but not downstream products is going to erode the end markets for the steel.
“Trade cases and then 232 are a tool to enact a policy change and a whole system change.”
Zekelman said former President Trump used 232 as a stick to renegotiate trade deals he felt were old, antiquated, outdated, unfair and needed a revisionary look. NAFTA was one of those antiquated deals, he said. Just as important is the need to review USMCA after five or six years to see if it is working or needed to be tweaked again.
“It’s not just the U.S. that wants restrictions and duties on steel imported into the country – it’s everywhere and everybody’s starting to realize that we’ve got to sort this thing out in a big way or we’re going to be left with a void here that we can’t fill. It’s going to be a problem.”
While Zekelman is supportive of producing the most environmentally responsible steel, doing so requires commitment from not just the steelmakers. “We have to reinvest so that we’re efficient so that we can be the world leader. In order to do that on a fair and level basis we have to enact some policies that are in many views protecting us from players that are not looking at us the same way that we are and not playing by the same rules. That just has to be done. It’s a reality.”
There’s a lot more that can happen if we just free up the American mind, the American spirit, the American will, to go get it done and take the controls off and let us go. In some cases, Zekelman said you’ve got to put some protections around to level that playing field and make it happen.
“Is that self-serving? Sure, it’s self-serving for me. I want to grow a bigger business. Forgive me for wanting to put in more plants, employ more people, consume more American steel, pay more taxes, support more communities.”