As we continually try to keep an eye on what is happening in our industry, several signals are regular. They may not always portend a big-picture issue, but they help to monitor the health of our industry.

    Industrial Heating’s monthly economic indicators are one such signal. A regular group of industry leaders are surveyed each month to bring you these numbers. Our indicators for January, released late in the month, showed contraction in RFQs, number of orders, change in backlog and expected health of the industry. Needless to say, this is not a particularly healthy industry signal.

    To balance these numbers, MTI recently released its 2012 member-company sales results. These numbers were up 7.4% over 2011. This is in spite of the fact that December 2012 sales were down 7% from December 2011. Overall, this is good news, but downward trends later in the year may be a contrary signal.

    As I write this, the steel industry seems to be getting a lot of press. While the health of steel doesn’t directly signal the health of our entire industry, it is a portion of it. The latest Ernst & Young Global Steel report indicates that there are too many mills and too little demand, which will lead to a poor year for steel. They predict that global steelmaking capacity will continue to exceed demand growth through 2013.

    Reasons for this excess capacity include the 39% growth of the Chinese steel industry from 2008-2012, according to the World Steel Association (WSA). During that same time period, the steel industry in India grew by 33% while overall world steel production was up 15%. It’s no wonder excess capacity exists. To address this excessive growth problem, the Chinese government is planning to consolidate the steel industry to control capacity expansion.

    Did you know that Asian countries produced 65.4% of the world’s steel in 2012? Were you aware that steel production was a record 1.5 trillion tons in 2012? Had you heard that U.S. Steel posted a Q4 net loss of $50 million in 2012? Since Japan and the U.S. – the #2 and #3 producers globally –
decreased production of steel from 2008-2012, India is poised to take over the #2 spot.

    In a recent story, Posco – the world’s fourth-largest steelmaker – is suggesting there will be severe competition for survival in the industry this year. A different article from West Virginia suggests that the American steel industry continues to face hard times because low wages and poor working conditions allow many other countries to make and export steel at lower costs.

    The Alliance for American Manufacturing (AAM) recently reported that steel has lost 5.5 million jobs in the last decade with 2.4 million being the direct result of trade deficits with China. Over the years, the steel industry has improved its productivity significantly, resulting in job losses (mostly through attrition). In the early 1980s, it took 10.1 man hours (MH) to produce a finished ton of steel. In 2006, this was down to 2 MH/ton.

    One of the things the North American steel industry has in their favor is inexpensive natural gas fuel. We should see more industries re-shoring production because of this abundant natural resource. Hopefully, our energy-intensive thermal-processing industry will reap the benefits as well. Speaking of energy intensity, another milestone achieved by the domestic steel industry is being the world leader in lowest energy intensity per ton of steel produced.

    Another useful factoid that you may not know involves coal. One would think that the coal industry would be suffering because of the cheap and available natural gas supply in North America. Well, I suppose this is true relative to domestic usage. But did you know that the Chinese government has posted record months of metallurgical coking coal imports since last fall? Thermal coal imports also steadily rose in 2012. China will soon surpass the rest of the world COMBINED in coal consumption. Consequently, the U.S. posted its highest-ever volumes of exported coal in 2012, a 9% increase over the record set in 1990. The Mobile Tag at the end of this article can be used to see the recently released EIA graph.

    One of the things our government can do to “help” the steel industry is nothing. As we have reported in the past, restrictive environmental laws will surely have a negative effect on steel and the broader thermal-processing industry. Since the President pledged to take on global warming (now known as climate change) in his second inaugural address, we can assume that the government is going to try to “help” us again. IH

 

Reed Miller,

Associate Publisher/Editor