 A furnace helper at Republic Engineered Products in Canton, Ohio, cleans out the tap hole and the runner that allows liquid steel to flow from an electric arc furnace into a waiting ladle. (Photo by Scott Shaw) |
|
Posted on 05/27/2008 9:16:59 AM PDT by Incorrigible
By PETER KROUSE
A furnace helper at Republic Engineered Products in Canton, Ohio, cleans out the tap hole and the runner that allows liquid steel to flow from an electric arc furnace into a waiting ladle. (Photo by Scott Shaw) |
|
CLEVELAND, OH — The last time the U.S. economy was in or near a recession, the U.S. steel industry was tanking, too.
Not this time around.
U.S. steelmakers are full sail amid the doldrums. That's good news for Northeast Ohio, where several mills churn out steel for such diverse products as oil wells, farm tractors and drainage culverts.
A number of reasons account for the industry's stability. Less competition, for one. The carnage earlier this decade led to widespread consolidation, leaving three major producers of flat-rolled steel, used widely in vehicles and appliances: ArcelorMittal, U.S. Steel and Nucor.
Domestic demand plays a part, too.
Even though auto production and new-home construction are down, several other U.S. industries that use steel in their products and equipment remain healthy. The energy sector is one. Agriculture is another.
Strong demand overseas also has helped. It has gobbled up much of the steel that might otherwise be imported to the United States, while those still inclined to ship here have found the weak dollar cuts into their profits.
On the flip side, the weak dollar has made domestic steel and its end uses more attractive to customers overseas.
As a result, steel prices have hit historic levels.
"Unprecedented is really the adjective that sums it all up," said Steve Peplin, chief executive officer of steel user Talan Products in Cleveland.
Much of the price increase has been from surcharges applied to steel because of the high cost of raw materials. Iron ore is way up, evidenced by the surging stock price of iron ore and coal producer Cleveland-Cliffs Inc.
Coal used to make coke for the blast furnace also has shot up. So, too, scrap metal, the main ingredient in steel produced in an electric arc furnace.
Meanwhile, metal users are feeling the pinch.
Talan Products, which stamps out specialty fasteners, expects to pass on much of the steel price increases.
"We're not going to go out of business," Peplin said.
Others might not be so lucky. Eventually, as prices rise, steel users look for substitute materials such as aluminum or engineered plastics.
It's not a question of the steel producers making exorbitant profits, Peplin said. It's just capitalism at work.
"They deserve to make some money when they can," he said.
In Cleveland, ArcelorMittal's plant along the Cuyahoga River is running flat out. Last year, the mill produced 2.5 million tons of steel. This year, it's slated to hit 3 million tons, said Terry Fedor, general manager of the Cleveland mill as well as rolling mills in Weirton, W.Va., and Lackawanna, N.Y., and coke ovens in Warren, Ohio.
"I think a lot of it has to do with the weak dollar," he said.
The dollar has kept imports at bay, providing more opportunity for domestic mills. Also, some of the plant's customers are exporting more, Fedor said.
The Cleveland mill produces a lot of steel for the auto market and those orders have held up, Fedor said, although he couldn't explain why. Also, the plant recently added Whirlpool Corp. as a customer. The appliance maker has a plant in nearby Clyde, which is where Fedor believes the steel from Cleveland is sent.
Meanwhile, Republic Engineered Products — a Fairlawn, Ohio, maker of steel bars, with major plants in Lorain and Canton — has been through two bankruptcies this decade. It's now on solid ground as a subsidiary of a Mexican company. The bulk of its steel goes into auto parts like gears, axles and shafts.
Republic has seen shipments drop recently to one of its major customers, American Axle, which has idled most of its plants because of a labor strike. But several other markets have picked up the slack, said Ted Thielens, vice president in charge of sales, marketing and planning. The general industrial market is very strong, he said, and export markets have opened up.
Three to four years ago, exports accounted for less than 1 percent of Republic's sales. Now they're 5 percent to 10 percent. While the company has long sold into Mexico and Canada, the new opportunities have been mostly in Europe, but also in Brazil and South Korea, Thielens said.
Charter Steel's electric arc furnace in Cuyahoga Heights is so busy the company added a third labor crew to its melt shop in October and plans to add a fourth by April of next year. The electric arc furnace is where scrap steel is melted to create new steel. As have the other mills, Charter has benefited from the lack of imports. Overseas steel makers that might otherwise ship to the United States are finding better opportunities in places like Ukraine, the Middle East, China and India, said Jack Lynch, the company's sales and marketing manager.
(Peter Krouse is a reporter for The Plain Dealer of Cleveland. He can be contacted at pkrouse(at)plaind.com.)
Not for commercial use. For educational and discussion purposes only.
The weak dollar makes the prices of commodities like gold and oil go up but it also makes American industry more competitive.
Could be the industry is leaner and more competitive than it was 20 yrs ago.
Good news!
I wonder how many of those are going to be out of work mortgage brokers and realtors. ;-)
The ones around me cannot even run a lawnmower, so it would be entertaining to watch them around molten steel...
Breifly, at least.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.