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Steel turnaround: nearly achieved: with little challenge from imports, domestic steelmakers expect that supplies will tighten and prices will rise again this year, though more modestly than in 2004.

Article Excerpt
Following a record-high year for shipments, revenues and earnings, U.S. and Canadian steel producers say they are poised to meet the many challenges of the steel market in 2005.

The industry has certainly shed the bunker mentality of bankruptcies and liquidations, layoffs and import relief, replacing it with newfound prosperity and an optimistic attitude about investing in the future.

While they look around for further merger opportunities, domestic producers are even acknowledging the key role that imports--fairly traded, of course--should continue to have in North America.

U.S. Steel and Nucor Corp. executives both praised the federal government's mid-March decision to extend and expand the Steel Import Monitoring and Analysis System. The system is used by producers, importers, distributors and end-users to track U.S. imports in a timely manner. The program has been expanded to cover a wider range of steel products through 2009. The goal is to help protect against sudden surges in imports, which can destabilize the domestic market.

Today's irony is that the volume of imports arriving in the first quarter has been relatively anemic, because foreign producers are finding higher prices in other international ports. One domestic minimill's commercial executive estimated that hot-band prices must be sustained here at $620 to $650 a ton before the U.S. market will strongly attract imports again.

During recent conference calls with analysts and investors, several major carbon fiat-roll manufacturers--U.S. Steel, Nucor, International Steel Group, AK Steel Inc., Steel Dynamics, Dofasco and Ipsco--all presented a positive outlook for 2005.

DEMAND OUTLOOK

Based on their order books and customer comments, steelmakers are confident that demand will regain its earlier strength, once the inventory glut works its way through the supply chain.

"We continue to see good demand across virtually all end markets, and inventory levels are being worked down," said U.S. Steel Corp. President and CEO John Surma. In the fiat-roll segment, the company forecasts its 2005 shipments will reach 15.4 million tons, down slightly from last year because one blast furnace will be down for a reline.

U.S. Steel's outlook "reflects what we're seeing right now in terms of how material is shipping. We are seeing strength across a wide range of our customers. We think the inventory will clear out in the near term," said Gretchen Haggerty, vice president and chief financial officer.

The inventory is mostly in the intermediate market--service centers and converters, Surma said. Most end-users--automotive, equipment and appliance OEMs--are already providing solid shipment and order rates.

President and CEO Dan DiMicco and other executives at Nucor Corp. say last year's strong business conditions are carrying over. "We expect the second and third quarters to be stronger than the first quarter," said Terry Lisenby, Nucor's chief financial officer.

Joe Rutkowski, Nucor executive vice president-plate, says the plate market remains very strong. "The heavy equipment OEMs are improving their outlook in 2005," he said, noting that Nucor was able to collect $30 per ton more on January plate shipments....

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