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Carbon flat-roll's looking up: now that the industry has right-sized inventories, and with imports on the wane, domestic producers expect demand for flat-rolled steel to pick up in 2008.

Article Excerpt
PROSPECTS ARE FINALLY LOOKING UP again for the carbon flat-roll market after a relatively lackluster year marked by lukewarm demand and an inventory correction on both the service center and end-user levels. With that correction largely complete, combined with a significant decline in imports, U.S. flat-roll producers report that their order books are filling up. In fact, they've announced a $20 to $30 per ton price increase.

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Charles Bradford, metals analyst and principal of Bradford Research/Soleil Inc. in New York, characterized flat-roll as the worst of the major steel markets, but perhaps not for long. "While it isn't on fire, flat-roll demand is improving," says Keith Busse, president and chief executive officer of Steel Dynamics Inc., Fort Wayne, Ind.

John P. Surma, chairman and chief executive officer of U.S. Steel Corp. in Pittsburgh, says he is very optimistic about the flat-roll market's long-term prospects given the relatively weak U.S. dollar compared with most other currencies, higher freight rates for foreign competitors and a reasonable economic environment.

"Certainly demand in the first half of this year wasn't terribly good," says Roy Platz, manager of marketing for ArcelorMittal USA in Chicago. "Apparent steel consumption was down 5.5 million to 6 million tons vs. the first half of 2006 with about half of that due to the inventory liquidation. Service centers came into the year with record inventories after being very low for much of 2006."

U.S. steel service center inventories totaled 13.1 million short tons, or 2.7 months of stocks on hand, in January 2006, according to the Rolling Meadows, Ill.-based Metals Service Center Institute. Increasing steadily throughout the year, service center inventories ended 2006 at 16.5 million tons, or 4.7 months of supply.

Fingers point to imports as the cause of this inventory buildup. "More often than not, when service centers need to destock inventories over a long period of time, it is due to overbuying of offshore product," observes Gregg Mollins, president and chief operating officer for Reliance Steel & Aluminum Co. in Los Angeles.

Total U.S. finished steel imports last year reached a record 35.9 million tons, up 42 percent from 2005, according to the American Iron & Steel Institute in Washington, D.C. A substantial percentage of flat-roll imports apparently found its way into service center and end-user inventories because of the downturn in demand that began last...

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