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Released May 26, 2016 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. steel manufacturers are reeling from global oversupply and the flood of inexpensive subsidized imports coming into the market from countries such as China. The integrated steel makers, which have higher costs, are at risk. Some have closed facilities, others scaled back production, and most have reduced capital expenditures (capex). Recycling mills, which use scrap steel and in general have lower costs, have fared better, but there are still problems, especially for those that serve the energy markets, which have been hit by low oil and gas prices. Demand for drilling pipe and rig steel has fallen significantly.
In the U.S. and Canada, steel remains the largest non-mining sector, with $17 billion in projects planned. The Southwest region, which includes Texas, Louisiana, Arkansas and Oklahoma, is the largest region for steel projects. Big River Steel LLC in Arkansas and Voestalpine AG (Linz, Austria) in Texas are nearing completion of major grassroot projects in the Southwest region, but capex activity has slowed. The only new grassroot steel mill project to start construction this year in the U.S. is Commercial Metals Company's (NYSE:CMC) (Irving, Texas) $250 million rebar mill in Durant, Oklahoma.
The Steel Industry is the second largest sector in the Metals & Minerals Industry for project spending globally. "Right now we are tracking more than 4,100 projects totaling $421 billion," said Joe Govreau, VP Research Metals & Minerals for Industrial Info Resources in a recent Steel Sector Update Mini-Presentation. "This includes everything from large grassroot steel mills and expansion projects to smaller equipment additions and automations, but a lot of these projects are at risk given the current market conditions."
China has overbuilt steel manufacturing capacity in recent years. It has a capacity of about 1.2 billion metric tons and produced 800 million metric tons in 2015. In the U.S. and EU, tariffs and duties are being levied and litigated, but this may or may not benefit U.S. steel makers in the long run.
China is getting the idea and has announced stunning cuts and mill closures that will result in the layoff of 5 million to 6 million workers in the steel and coal industries over the next few years. China's government will spend $23 billion over the next few years to cover layoffs in coal and steel. This effort could take 100 million to 150 million tons of steel making capacity out the market.
But is it too little too late?
China continues to build new steel mills even as it is closing older inefficient producers. China is developing 168 projects totaling $69.5 billion to increase capacity either through expansion of existing mills or grassroot construction. For example, Shandong Iron and Steel Limited (Jinan, Shandong) is constructing a $6.7 billion grassroot mill in Rizhao, China in Shandong province. When completed at the end of 2017, it is designed to produce about 8 million tons per year. Construction began in 2014. There are two other large mills in the 10 million ton-per-year capacity range that are under construction in China.
"This is going to bring a lot of new capacity online at the same time the country is closing older mills and displacing millions of jobs," Govreau continued. "Painful progress for sure, but in my opinion not enough to have an impact on the global steel market. More capacity is going to have to been removed before the problem is solved."
View the 5-Minute Steel Sector Update Mini-Presentation by clicking here.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
In the U.S. and Canada, steel remains the largest non-mining sector, with $17 billion in projects planned. The Southwest region, which includes Texas, Louisiana, Arkansas and Oklahoma, is the largest region for steel projects. Big River Steel LLC in Arkansas and Voestalpine AG (Linz, Austria) in Texas are nearing completion of major grassroot projects in the Southwest region, but capex activity has slowed. The only new grassroot steel mill project to start construction this year in the U.S. is Commercial Metals Company's (NYSE:CMC) (Irving, Texas) $250 million rebar mill in Durant, Oklahoma.
The Steel Industry is the second largest sector in the Metals & Minerals Industry for project spending globally. "Right now we are tracking more than 4,100 projects totaling $421 billion," said Joe Govreau, VP Research Metals & Minerals for Industrial Info Resources in a recent Steel Sector Update Mini-Presentation. "This includes everything from large grassroot steel mills and expansion projects to smaller equipment additions and automations, but a lot of these projects are at risk given the current market conditions."
China has overbuilt steel manufacturing capacity in recent years. It has a capacity of about 1.2 billion metric tons and produced 800 million metric tons in 2015. In the U.S. and EU, tariffs and duties are being levied and litigated, but this may or may not benefit U.S. steel makers in the long run.
China is getting the idea and has announced stunning cuts and mill closures that will result in the layoff of 5 million to 6 million workers in the steel and coal industries over the next few years. China's government will spend $23 billion over the next few years to cover layoffs in coal and steel. This effort could take 100 million to 150 million tons of steel making capacity out the market.
But is it too little too late?
China continues to build new steel mills even as it is closing older inefficient producers. China is developing 168 projects totaling $69.5 billion to increase capacity either through expansion of existing mills or grassroot construction. For example, Shandong Iron and Steel Limited (Jinan, Shandong) is constructing a $6.7 billion grassroot mill in Rizhao, China in Shandong province. When completed at the end of 2017, it is designed to produce about 8 million tons per year. Construction began in 2014. There are two other large mills in the 10 million ton-per-year capacity range that are under construction in China.
"This is going to bring a lot of new capacity online at the same time the country is closing older mills and displacing millions of jobs," Govreau continued. "Painful progress for sure, but in my opinion not enough to have an impact on the global steel market. More capacity is going to have to been removed before the problem is solved."
View the 5-Minute Steel Sector Update Mini-Presentation by clicking here.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
