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Virtual FMA

Doing Business Post Pandemic

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MCN Editor Beth Gainer This year’s virtual FMA meeting kept attendees up-to-date on business strategies and the state of the metals industry as pandemic worries slowly dissipate.

The Fabricators & Manufacturers Association Virtual Annual Meeting on March 3 and 4 shared a variety of insights – from promoting one’s business virtually to the state of the steel industry to the state of the economy.

Virtual times call for virtual measures. Lisa Wertzbaugher held a session titled “Selling in a Virtual World - in Person, in the Digital Space, in a Pandemic.” Since the pandemic, she has recalibrated how she successfully operates. She co-owns Wertzbaugher Services LLC, a welding, fabrication and trucking firm in West Liberty, Iowa.

Her session focused on successfully reaching customers without in-person interaction. She makes cold calls as a prospecting tool. “I’m trying to find out who’s the decision maker, how is business going, how their vendors are doing, have they lost some vendors and are they looking for new suppliers,” she says, adding that her cold-call campaign has achieved success, as have a quarterly newsletter and limited direct mail campaigns to a target audience.

Wertzbaugher also discussed the various social media outlets, adding that if business owners are uncomfortable managing social media, they could hire college interns for the job. She also highlighted the importance of relevant and timely blog posts, an effective website and engagement via virtual meetings and webinars.

“In this day and age, webinars are a must-do for your business, no matter how small you think you are,” she said. “The train has left the station and is moving fast, so you need to get onboard.”

Philip Bell, president of the Steel Manufacturers Association, presented the “Steel Manufacturers Overview.” He noted that while 2020 began with capacity utilization rates of over 80 percent, COVID-19 caused them to drop dramatically. “At the end of January, capacity utilization was around 75 to 76 percent, which is much better than we were several months ago, but still not in the 80 to 85 percent range that’s optimal for steel producers,” said Bell. “We’re clawing our way back and are somewhat optimistic about 2021.”

There is a reason for his optimism. “When we look at the Institute for Supply Management Manufacturing Index, it is well above the 50 level. That indicates improvement in the manufacturing environment and the procurement sector,” said Bell.

Bell said OCTG consumption is down, dropping about 35 percent from 2019 to 2020. “Although there will be a modest increase projected in OCTG consumption in 2021, most experts think we’re five to 10 years away before we have a healthy oil country tubular goods market,” he added.

In addition, Bell said a lack of a long-term, well-funded, comprehensive infrastructure investment program would cause decreased nonresidential construction spending. He added that SMA is cautiously optimistic for a bipartisan infrastructure investment, as this would be steel intensive and create jobs.

Bell expressed optimism about the rise in the number of EAFs in the U.S., which he said, is “the safest and most sustainable way to make steel.” At this point, the EAF sector represents almost 70 percent of all U.S. steel production, creating a sustainable steel industry.  

However, the U.S. could still improve its sustainable measures. “In China, over 80 percent of the steel mills are just 15 years old. The average age of a U.S. steel mill is over 30 years old,” said Bell. “So if we don’t use this period to invest in greenfield facilities and upgrade melt shops, rolling mills and continuous casting operations, we’re going to find ourselves ill-suited to deal with the economic recovery post-COVID and any infrastructure investment package that might get planned by Congress.”

Overall, Bell showed optimism. “We had to overcome a global pandemic, societal unrest, a contentious presidential election and an economic downturn,” he said, “but steel manufacturers, in fact the entire steel supply chain, stepped up to their obligation as an essential industry and met these issues head-on.”

In the session “Effective Metals Pricing Strategies,” Tim Stevenson, founding partner and CEO of Metal Edge Partners, LLC, Plymouth, Minn., said that January 2021 found many countries in expansion mode, possibly due to recovery from the pandemic. “At the moment, we’re seeing a lot of strength in the global economies, which is inflationary for metals prices,” he said.

He noted that $3.5 trillion is being poured into federal COVID-19 spending and tax relief. To put that amount into perspective, he shared that total 2019 federal spending was $4.4 trillion. “In addition, the Federal Reserve is also printing money and buying U.S. treasuries and flooding the economy with money,” he said. “And generally we look at [both of these] as an inflationary factor.”

Pre-pandemic, the U.S. produced approximately 1.9 million tons of steel a week, but as COVID-19 hit, steel production “collapsed as a number of mills were taken offline,” he said. Steel production fell to around 1.2 million tons per week. As mills have been restarted and the steel demand has started its recovery, steel production is now roughly 1.7 million tons a week.

Though construction seems strong, Metal Edge Partners believes that later in 2021 the construction sector will experience some softness. Construction and automotive comprises 60 percent of steel demand.

Stevenson also emphasized the importance of keeping a close eye on China. In February, China produced approximately 91 million tons of steel, compared with the monthly U.S. production of about 8.1 million tons. Because of the tariff structures, Chinese steel really can’t be directly imported into the U.S. However, Chinese steel still has an impact on the U.S. because if China ships steel to Vietnam, Thailand or other countries around the world, that’s just simply more steel in the market and then those countries that don’t have as onerous a tariff structure can export to the U.S. “So it’s really critical to look at China because it’s really the tail that wags the dog when it comes to commodities,” he said.

He also noted the fact iron ore prices have skyrocketed. “In March we were down around $80 a ton, and we’ve gone up to $160 a ton in iron ore,” said Stevenson. “And this is important because when you’re running a steel mill, you can make steel out of iron ore and metallurgical coal or you can melt scrap. So when iron ore prices go up significantly, it pushes scrap up because after all, scrap is just iron ore plus energy stored in that form.”

In the “Economic Outlook” session, Dr. Chris Kuehl, managing director of Lawrence, Kan.-based Armada Corporate Intelligence, gave attendees his insights on how the U.S. economy is faring.

“We were doing brilliantly in January and February of last year. We were growing. Then everything stopped, and it stopped in a very bizarre way,” he said. “There was no real reason for a recession; it was a recession by edict; everything was closed down because we were trying to deal with the pandemic.”

In fact, Kuehl expressed that in many ways, the 2008 recession was worse because of a series of downturns, even after recovery. He believes, however, the economic recovery from last year’s pandemic is a perfect V, landing back to pre-recession numbers or even better. “We are expecting a little bit of a slowdown going into 2021, just because companies will be catching up with the demand that was there in 2020,” said Kuehl, “but we’re getting back very quickly from the depths that we went to in 2020.”

He added that capital spending has improved and we may see less commercial construction because people are working remotely rather than working in office buildings.

According to Kuehl, today, people are focused on the money supply part of the economy. “The stimulus plan is turning more into a rescue plan,” he said, explaining that the idea behind a stimulus plan is that giving consumers money results in them spending their way out of a recession.

However, 2020 was an atypical recession, he added. Consumers couldn’t spend their way out of the recession because service venues such as restaurants, travel, concerts and sporting events were shut down. “The economy is already recovering [without the stimulus], so if you dump a bunch of money into the consumers’ hands now, they may,  indeed, spend it, and the economy will overheat,” said Kuehl. “When the economy starts to overheat, that’s when you start to get inflation and the Fed begins to react.”

He ended the session with a note of optimism, however. As recent as November 2020, COVID-19 dominated people’s thoughts. In March, inflation and fiscal policy were more worrisome to the financial sector than the pandemic. “We’re now beginning to look at COVID as yesterday’s concern,” he said. “It hasn’t gone away completely, but there’s light at the end of the tunnel, and we don’t think it’s an oncoming train.”

[Sidebar]

COVID Claims FABTECH Mexico Again
FABTECH Mexico has again fallen victim to the coronavirus, with the 2021 event now canceled. FABTECH is the leading trade show for the North American metals processing community, presented jointly by the Fabricators and Manufacturers Association, SME, Precision Metalforming Association, American Welding Society and Chemical Coaters Association International.The event was originally scheduled for the first week of May, then pushed back another month due to COVID-19.  But with the pandemic continuing to linger, event organizers opted to scrap this year’s show altogether.The next edition of FABTECH Mexico will be held May 3-5, again scheduled for Monterrey where this year’s event was to be held. Before the coronavirus disrupted the globe, FABTECH Mexico rotated yearly between Monterrey and Mexico City.

“As the fight to end the COVID-19 pandemic continues throughout the world, FABTECH is closely monitoring all ongoing health and safety concerns including travel restrictions and the uncertainty surrounding a projected vaccine timeline in Mexico. After careful evaluation of currently available information, including the recommendations from the Centers for Disease Control, the FABTECH Event Partners have made the difficult decision to cancel this year’s FABTECH Mexico scheduled for June 8-10, 2021,” a release on the trade show’s website declared.

“Our collective priority remains to be the health and safety of our exhibitors, attendees, and support teams.  While it is disappointing to have to again delay FABTECH Mexico, we have thoughtfully considered all factors essential to conducting a safe and successful show that delivers the experience and ROI our exhibitors and attendees expect. The Monterrey market is important to the industries served by FABTECH and moving the event to next year allows more time for authorities to successfully navigate this pandemic,” the release said.

The next FABTECH event on the schedule is the U.S. version, scheduled Sept. 13-16 at McCormick Place in Chicago. This is the first year of the new dates for the Chicago event, which previously was held in November.[Sidebar]

COVID Claims FABTECH Mexico Again
FABTECH Mexico has again fallen victim to the coronavirus, with the 2021 event now canceled. FABTECH is the leading trade show for the North American metals processing community, presented jointly by the Fabricators and Manufacturers Association, SME, Precision Metalforming Association, American Welding Society and Chemical Coaters Association International.The event was originally scheduled for the first week of May, then pushed back another month due to COVID-19.  But with the pandemic continuing to linger, event organizers opted to scrap this year’s show altogether.The next edition of FABTECH Mexico will be held May 3-5, again scheduled for Monterrey where this year’s event was to be held. Before the coronavirus disrupted the globe, FABTECH Mexico rotated yearly between Monterrey and Mexico City.

“As the fight to end the COVID-19 pandemic continues throughout the world, FABTECH is closely monitoring all ongoing health and safety concerns including travel restrictions and the uncertainty surrounding a projected vaccine timeline in Mexico. After careful evaluation of currently available information, including the recommendations from the Centers for Disease Control, the FABTECH Event Partners have made the difficult decision to cancel this year’s FABTECH Mexico scheduled for June 8-10, 2021,” a release on the trade show’s website declared.

“Our collective priority remains to be the health and safety of our exhibitors, attendees, and support teams.  While it is disappointing to have to again delay FABTECH Mexico, we have thoughtfully considered all factors essential to conducting a safe and successful show that delivers the experience and ROI our exhibitors and attendees expect. The Monterrey market is important to the industries served by FABTECH and moving the event to next year allows more time for authorities to successfully navigate this pandemic,” the release said.

The next FABTECH event on the schedule is the U.S. version, scheduled Sept. 13-16 at McCormick Place in Chicago. This is the first year of the new dates for the Chicago event, which previously was held in November.