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State of the Steel Industry

On Monday afternoon executives from the American Iron and Steel Institute provided an update on the state of the steel industry. After Thomas Gibson, president and CEO of AISI, welcomed everyone, Dan DiMicco, AISI chairman and CEO of Nucor Corp., began with the latest industry data.

DiMicco started off by saying that they are seeing positive signs that the economy continues on a slow but steady recovery, with steel shipments at approximately 22 million tons in the first quarter of 2011. With an expectation to see a strengthening of demand for the second quarter and the second half of the year, the estimate is for a shipment of 95 million tons in 2011, an increase of roughly 14 percent over the 83 million tons the industry shipped in 2010. DiMicco also mentioned that domestic capacity utilization rose to 75 percent in the first quarter, a five percent improvement from the first week of January, similar to the positive improvement that was experienced in the first quarter of 2010.

DiMicco reported that finished import market share is currently at 21 percent, the same level as in 2009 and 2010. Yet the most recent steel import monitoring and analysis data from the March recorded a sharp rise in finished imports, bringing it to the highest level since January 2009.

In terms of AISI's policy priorities, safety remains a top priority for the industry, DiMicco said. AISI also supports a strong pro-manufacturing strategy that will assist U.S. manufacturers in competing in today's global economy. With a primary focus and support to see the government avoid excess regulation that reduces industrial competitiveness, the need to keep trade laws strong and strictly enforced remains important. Additional policy priorities include addressing China's currency manipulation and encouraging the development of energy efficiency and breakthrough technologies.

Mario Longhi, AISI director and president and CEO of Gerdau Ameristeel Corp., offered the AISI's energy policy perspective saying that the steel industry offers both opportunities and challenges in regards to energy. Presently the energy sector is a strong source of steel demand, and it is expected to remain strong throughout the decade. All areas of energy--oil pipelines and offshore drilling, natural gas extraction and transport, clean fuel, nuclear power, wind, solar--require large amounts of steel. Representing 7 percent of steel demand and along with the continuing resurgence in the automotive sector, the energy sector is an important market, Longhi said.

Longi continued, saying that natural gas is a strategic domestic source that can help drive economic recovery. Government policy should support the further development of natural gas resources and the climate and energy policy must take into account international competitors and how the cost of compliance with government policy can alter the competitive balance in the marketplace. Longi went on to say that Congress must act to prevent the misguided plan of the EPA's regulation of greenhouse gases from undermining efforts to promote economic growth and job creation.

While the U.S. steel industry has achieved a 30 percent reduction in energy intensity per time of steel produced since 1990, making it a global leader as compared to steel industries in other nations, the challenge is to continue to make further reductions through the use of completely new technologies, which the U.S. lags far behind. Longi said that government incentives to further energy efficiency goals should be part of an effective natural energy policy.

John Surma, AISI director and Chairman and CEO of the United States Steel Corp., said that to strengthen the economy and competitiveness, the manufacturing sector needs to grow. The government's approach to trade policy is critical to AISI's ability to support this goal. Priorities are to withstand rules-based trade, keeping strong the trade laws against unfair trade and injurious surges, strictly enforcing trade agreements and combating Chinese currency manipulation and other protectionist foreign government policies. Surma said that the AISI continues to urge Congress to pass legislation to address China's currency undervaluation, by passing the Currency Reform for Fair Trade Act.

Regulo Salinas, AISI vice chairman and vice president of Ternium Mexico, reported that the NAFTA region is also experiencing a slow but steady recovery. In Mexico, economic growth is expected to be in the range of 4 to 5 percent this year. While the automotive market has been a solid source of steel demand, construction continues to lack throughout the NAFTA region. A NAFTA-wide infrastructure conference is scheduled to be held in Washington, D.C., on June 7.

Following the reports from the executives, a short question-and-answer session was held.


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