December 04, 2008

Mr Surma forecast good outlook for US steel industry

According to Mr John Surma president and CEO of US Steel Corp, although world’s steel consumption continues to increase, the US steel industry faces several challenges. Mr Surma in the keynote address at CRU’s North American Steel Conference in Chicago said that the current trends bode well for domestic steelmakers.

Mr Surma said that “Currently, the highest per capita steel consumption has been concentrated in emerging economies such as China and the former Soviet nations. The still very minimal amount of steel consumption in countries such as South America and Africa is a good indicator of the industry’s growth potential. Plus, the higher input costs for scrap and energy has leveled the market between the integrated mills, which produce steel from iron in blast furnaces, and the minimills, which use scrap melted in electric arc furnaces to make steel.”

Mr Surma said that “Yet the industry still faces serious challenges with China the most significant. Although China’s industrialization has spurred steel demand at rates not seen since after World War II, the country’s steel production has jumped to an estimated 140 million net tons this year from 130 million net tons in 2000. Its production has increased in that period at a rate that is greater than the total capacity of US mills.”

Mr Surma added that "It’s capacity is three times the US and growing and there is no real indication that China’s obsolete and environmentally outdated mills are being forced to close. It's the largest steel exporter as the result of government ownership and subsidies. It has the potential to destabilize world markets.''

Mr Surma said that human resources present another challenge to the industry, he said. Employee retirement will escalate in the next to five seven years, and replacing them with a work force with equal skills will be difficult. The talent pool is shrinking because of global competition for trained workers. Also, a generational gap that stops new entrants into the industry and ethnic diversity may make it difficult to merge different cultures. The labor force is growing at a slower rate. There is competition for top talent.”

Mr Surma further added that climate change is another factor for steel companies, which are responsible for emitting 15% of the carbon dioxide globally and 1% of it in the United States. Mr Surma said that “Steel has a positive role to play in climate change. We need to educate the public about our industry and what we’re doing about it. Steel is the best material available to build a better world and we need to do it in a cost effective manner.''