Ferrous

ONE BILLION AND COUNTING

The world’s steelmakers now produce 1 billion tons of steel annually, and it does not look like that number is likely to shrink back under 1 billion any time soon.

Presenters at the Ferrous Roundtable at the Institute of Scrap Recycling Industries Inc. (ISRI) Commodities Forum were predominantly bullish toward the future of steel demand and pricing, as well as toward demand and pricing for the ferrous scrap used to make steel.

Steel industry analyst Michelle Applebaum of Highland Park, Ill., predicted that domestic steelmakers this summer "have seen a low . . . both in production and prices" that will not be typical for the next two years.

Her forecast predicted an average price of $569 per ton hot-rolled steel coil in 2006 and an increase to $650 average pricing in 2007.

Additionally, she said she thinks steelmakers in the United States will boost production of steel from an estimated 101 million tons in 2005 to 109 million tons next year and to nearly 111 million tons in 2007.

As for scrap, Applebaum said her research firm sees "a continued metallics price push" as new steel production already in place in China and being added in India will strain supplies of iron ore, coke and ferrous scrap. "I don’t think scrap surcharges will go away. Nucor is committed to them."

While China’s surging 300 million tons of production has pushed the world’s annual production past 1 billion tons, India is producing just 35 million metric tons in a nation with nearly as many people as China.

However, New Delhi-based commodities broker Vidal Sahgal reported that India’s Ministry of Steel is helping increase steel production to 110 million metric tons by 2020.

According ot Sahgal, such a production increase would lead to the disappearance of India as an exporter of iron ore and the currently "unorganized" scrap industry may receive more financial attention to meet a growing steel industry.

More consolidation within the steel industry is also likely, according to John Harris of Mittal Steel NA, Chicago.

Mittal makes 65 million tons of steel annually at mills located around the world, but even this represents less than 7 percent of global production. "There is still more to happen," Harris said of steel industry consolidation, noting that by comparison three iron ore companies comprise 70 percent to 80 percent of that market.

Harris also said that further consolidation is warranted in the scrap market and called the recent Simsmetal-Hugo Neu merger "very impressive."

Steel consumer Kyle Stavig of steel drum manufacturer Myers Container, Emeryville, Calif., said the growing pains of the steel industry are apparent to his company, which has had to pay more for steel the past two years and has had difficulty finding steel to purchase in the aftermath of Hurricane Katrina.

The ISRI 2005 Commodities Roundtable Forum was Sept. 20 to Sept. 22 in suburban Chicago.

(More news about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)