In the News
According to a recent manufacturer’s survey in the heating industry, two thirds of the more than 1,000 survey respondents expect a better or much better 2011. That’s definitely good news as we look beyond 2010.
As an industry economic indicator, the steel sector is currently experiencing a rebound. Most analysts expect steel prices to remain weak for the balance of the year, but steel has shown signs of rallying in recent weeks as a result of global supplies easing. Some of this impact is due to China pulling back on production. Steel producers from China and some other markets have also announced material price increases in the last quarter.
In a related story, steel services are also enjoying an upswing. According to the Metals Service Center Institute, shipments in August totaled 3.2 million tons, which is up 25% from a year ago. From January though July, steel shipments reached 23.7 million tons, 19% higher than a year ago.
As of this writing, American Metal Market was reporting that U.S. Steel is “kicking the tires” of the Severstal mills in the western Pennsylvania area. While Severstal wants to sell all of its mills as a package deal, USS is reportedly interested in only the Severstal-Wheeling (formerly Wheeling Pitt) mills.
Warning strikes have been affecting the German steel industry over pay issues. The IG Metall trade union reported that 11,500 employees halted work for up to four hours in late September. The union has demanded a 6% pay raise for their 85,000 members. Strikes have affected ThyssenKrupp, Krupp Mannesmann and ArcelorMittal.
European steel lobby group Eurofer indicated that the European steel industry may receive only 60% of the carbon allowances it needs for free. Recent regulation drafted by the world’s largest cap-and-trade program is “far to ambitious,” according to Eurofer. They indicate that the proposed benchmark is 25-30% below the best performer. That means that even the best would be “taxed” by this cap-and-trade program. The fear is that the current proposal may “kill producers,” which could lead to “freezing steel production at economic-crisis levels, preventing its recovery and eliminating jobs.”
The World Economic Forum ranks the U.S. 48th in math and science education. Only four of the top 10 companies receiving U.S. patents in 2009 were American companies. A new report delivered to lawmakers in late September indicated that “the U.S. ability to compete globally in science and technology is on a perilous path.” A measure of this is that the U.S. share of high-tech exports has fallen from 21% to 14%, while China has risen from 7% to 20%.
A recent news story, which is probably false, indicated that China was blocking strategic minerals to Japan. Even if not currently true, the narrative is interesting, and it is something we have mentioned previously on this page. China has gained a strong market position – 97% of global production – in rare-earth (RE) materials, and they have reduced exports since 2006. In response, the U.S. House Science and Technology Committee marked up H.R. 6160, which seeks to strengthen RE technology from mining to manufacturing to recycling. Perhaps if the government and the green movement had not fought to close RE mines in the U.S. this might not be a problem. But that’s a topic for a different day.
It appears that the Anshan Iron and Steel investment in the American steel industry is moving forward. Not sure what to think about this. The industry and our government seem concerned that this will threaten American jobs, but how is it different from Honda or Hyundai building plants in the U.S. to make cars here? That activity doesn’t seem to receive the same negative press. And while this activity may have a negative impact on Detroit, these plants certainly are employing American workers.
Winter Natural Gas Outlook
By late September, natural gas prices had fallen more than 25% from their mid-summer highs, and hedge funds cut wagers by 16%. Prices have fallen 31% this year due to rising production from shale formations and supply gluts. Recent gas stockpile increases were the highest gains experienced for this time of year since 2006. All things considered, it does not appear that gas prices will take a bite out of the industry this winter. IH