CHICAGO | The story of growth within the world's largest steel producing and consuming country will have a direct impact on the U.S. steel market as it attempts to claw its way back to pre-recession levels for production and earnings, participants at a steel conference said Monday.
John Johnson, CEO of CRU China, said steel demand in China – as well as the entire country – is in the middle of an economic pullback after having several quarters of slowing, yet positive economic growth. That pullback worried several conference attendees amid concerns steel from China and other emerging economies may end up in the North American market in efforts to capture higher prices.
Comments presented were made at the first day of the CRU Group's sixth annual North American Steel Conference at the Westin Chicago River North hotel. A London-based consultant, the CRU Group, is hosting the two-day conference for executives, suppliers, analysts and customers of the steel industry.
After seeing sharp growth in steel consumption and government spending to build out China's infrastructure in the previous decade, Johnson said activity has moderated although the government remains interested in making those investments. In the next few years, he said annual growth in consumer spending on goods such as automobiles should outpace government spending on fixed assets.
Production reductions among consumers will help keep raw material prices down, but domestic industry participants said they remain worried as domestic steel capacity utilization is down more than 10 percentage points from its 2012 peak and forecasts for U.S. economic growth in the next couple years are below levels to see significant growth.
There are concerns about avoiding products that could be dumpted into the market, further driving down opportunities for domestic businesses.
“I think there's absolutely no way if you're in the steel business to ignore or escape the impact of China,” said Mark Breckheimer, president of Kloeckner Metals' heavy carbon group.
“It's going to be felt here in the United States with greater imports from other countries around the world, and I don't think it'll be entirely destabilizing, but I think our trade associations and our government will work to protect our borders from unfairly dumped steel.”
Based on the first nine months of 2012, the American Iron and Steel Institute said that total and finished steel imports could be up 19 percent and 21 percent for the year, respectively, compared to 2011.
Geoff Gilmore, president of Worthington Steel, said in the last few months China has sent product to other countries and as a result, other countries have started sending their products to the United States as an outlet. Parker said steel could reach U.S. shores in finished products such as washing machines or refrigerators, further depressing the domestic market.
Guilherme Gerdau Johannpeter, president of Gerdau Long Steel North America, cautioned people to be careful about painting China or other countries with a broad brush before reaching conclusions about their market strategies. He said there are often steep differences in import levels of various products such as wire rod and flat-rolled in the United States.
At the conference Monday, participants also discussed a range of other topics including the future of derivatives in the steel market, the outlook for raw materials and energy and the outlook for steel pipe used in oil and gas exploration and extraction.