Buoyed by a weak dollar and recovering demand among emerging markets, U.S. steel exports are waxing stronger than imports and providing a boost to flagging breakbulk carriers.
Capacity utilization at domestic U.S. steel plants fell below 50 percent at the depths of the recession, as the balance sheets of many U.S. producers became “risky,” Mark Burrus, head of the metals practice at KPMG told The Journal of Commerce's 20th Annual Breakbulk Conference and Exhibition Tuesday.
Many big U.S. producers that had taken on high debt levels to acquire other companies during the economic boom earlier this decade, now are swapping equity for that debt as they try to improve their balance sheets.
Meanwhile, in China, steel production is increasing, albeit at a slower rate than in recent years, even as exports are falling. The country almost single handedly fueled annual growth of 7 percent in global steel production between 2000 and 2007.
Production will decline between 2008 and 2012, Burrus said. “China is the story now,” he said, noting the country accounts for more than 40 percent of global steel production and 35.5 percent of global steel consumption.
By contrast, steel production in the U.S., Canada and Mexico accounts for less than 10 percent of global production, and the three NAFTA countries consume 10.8 percent of global steel output.
Burrus said the Chinese government had set a goal of consolidating most of the hundreds of domestic steel producers into two “globally competitive steel companies” by 2010.
The three largest Chinese manufacturers are Baosteel, which produces 35 million tons a year, Hebei Iron and Steel, and Wuhan Steel. At least six of the top 21 Chinese producers manufacture more than 21 million tons of steel a year, which is about what U.S. Steel, the largest U.S. producer, makes.
In the U.S. the destocking of steel inventories is at an end, and mill production and capacity utilization are on the upswing, Burrus said. “Capital spending has turned positive,” he said. “U.S. production has been very disciplined” during the recession. Manufacturers “did not continue to produce during the recession, as they have done in the past.”
Burrus said pricing rebounded to $550 per ton during August, and GE Capital is forecasting prices will reach $800 per ton by 2012, he said.
Source: Journal Of Commerce
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