In August, we discussed what we learned from a Pittsburgh-based conference about the opportunities for producers in the shale gas industry. This month, we will review some of the discussion at a recent Pittsburgh-based conference on steel. One of the features of AISTech is the “Town Hall Forum,” and we will peer into what was said by a group of steel-industry giants – U.S. Steel, Nucor, ArcellorMittal, Gerdau, Steel Dynamics, UBS and Vesuvius – about their businesses and the economy in general.

Before doing this, however, I can’t help but also recommend an upcoming conference – FNA 2010 in Orlando, Fla. on October 5 & 6. Like these other two conferences, FNA brings together industry experts for technical sessions as well as product display and demonstrations. A total of 24 quality technical sessions will be presented on topics from AMS 2750 to induction technologies to vacuum furnaces and energy efficiency. For our industry, FNA is the one conference to attend in 2010 if you can only attend one.

The Town Hall Forum title was Addressing Steel’s Priorities in Today’s Complex Economy. Seven industry executives answered questions on a variety of topics, including steel economics, capital expenditures, cap and trade, China, hiring strategies and new technologies. Their answers (briefly summarized here) are pertinent for our industry.

The first question was “What makes steel relevant?” Steel is important for national security reasons, and the industry needs to do a better job of connecting itself to the “hot topics” such as wind energy, natural gas plays, etc. The experts feel that production is coming back slowly, but they are generally being cautious with employee callbacks.

“Why do we continue to import steel?” While imports are high, much of this material is for semi-finished products such as slabs. Companies like California Steel purchase slabs, and from a transportation standpoint, this can be done more economically from Mexico than from the heartland of the U.S. Import abuses should be prevented versus reacted to. Chinese currency abuses need to be addressed by the current administration.

“Is China the issue?” It’s important to keep in mind that China is not the low-cost producer of steel. The U.S. has an advantage due to good iron ore and metallurgical coal availability. The key concern of these experts seems to be China’s steel capacity. If their economy softens a bit, they will have the ability to flood the worldwide market versus slowing production. To keep costs in line, steel companies are realizing they need to “back integrate.” Even the mini-mill companies are integrating into areas such as scrap and iron ore.

“What about capital expenditures?” For USS, spending was reduced in 2009, but they are currently increasing capital spending and expect to do so going forward. Nucor’s spending was actually higher in 2009 and has been reduced somewhat in 2010. Others indicated that while they continue to spend, payback is a key factor in the approval of these expenditures.

“Is cap and trade dead?” It’s not dead, but it does appear to be on life support. There is currently much resistance to anything that continues to suck more money from the economy. Their caution is that if the U.S. engages in cap and trade without the buy-in from other countries, it will be a major job killer here in the U.S.

“Is the steel industry attractive to young people in 2010?” Because more than half of its employees could retire in the next 10 years, steel offers salary-competitive employment opportunities. Some companies, like Nucor, work with 110 interns each year from which they hire about 25. The execs believe steel needs to do a better job marketing itself, especially with women, who currently make up over 50% of the labor pool.

“What is your strategy for new technologies?” This is an area where support companies can partner with steel companies, such as Nucor, which work with suppliers to develop new technologies because they do not have a huge R&D budget. For this reason, Vesuvius – a support company – indicated that their R&D expenditures have increased even when other things were being cut.

“Does stimulus spending affect the steel industry?” Stimulus spending will have very little impact on the industry because only $60 billion of the $800 billion is going to infrastructure projects.

“What makes you stronger?” The steel executives believe communications, liquidity, a strong balance sheet and the human element (good employees) are the keys to their respective company’s current and future success. That’s good advice for any company seeking to weather the current economic challenges and come out healthy on the other side. IH