U.S. Steel Manufacturers Expand Capital Expenditure Outlook

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Since our last report* on the U.S. steel industry, dated February 14, 2005, project spending activity has increased by about 30%. In February, the industry was looking at 115 projects, representing about $3.3 billion in total investment value (TIV). What a difference a few months can make. Currently, there are 153 active capital and maintenance projects scheduled to begin construction in 2005 or later. These projects represent more than $4.6 billion in TIV. That represents a significant increase. It seems that steel makers across the board, large and small, integrated, or minimill, are evaluating expansion and/or upgrade opportunities to take advantage of historical high steel prices and strong global demand.

Ohio is currently leading the way with more than $1 billion in planned steel industry projects, including a $200 million modernization at one of Republic Engineered Products' steel works.

Click on the image at right to view a breakdown of current steel industry spending by state.

The increase in steel production is putting pressure on raw material supply to steel mills. Prices for coal, metallurgical coke, scrap steel, and iron ore are increasing, and supply issues are of concern. All of these raw materials are being evaluated for expansion, as well. Everything from new and expanding coal and iron ore mines to new metallurgical coke making plants are being pursued.

Expansion and upgrade projects at steel mills are keeping equipment and service providers busy, not just in the U.S., but also globally. Morgan Construction Company, a supplier of rolling mill equipment and engineering expertise, based in Worcester, Massachusetts, is looking at several large turn-key projects in Mexico, Poland, Germany, Brazil, and the Middle East. During the downturn in the steel industry, steel makers downsized engineering staff and now are looking to outsource a lot of the new project work to engineering firms and equipment vendors.

The biggest news of the year, so far, is the recently finalized acquisition of International Steel Group (Richfield, Ohio), by Mittal Steel, creating the world's largest steel maker. It will be interesting to see how former ISG operations fare during the transition of management, which will take place over the next few months. The company has already lost key management personnel including former ISG CEO, Rodney Mott, who had originally been picked by Mittal management to head the U.S. operations.

*See U.S. Steel Industry Looks at $3.3 Billion in Future Planned Project Development, for details.

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