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- 2. INSTITUTE FOR SUPPLY MANAGEMENTSTEEL FORUM MAY 5, 2009 John Packard – Steel Market Update
- 3. Who is JohnPackard? Why is he here? What’s in it for me?
- 4. You know what?I think I’ll go into the steel business
- 5. WHO IS JOHNPACKARD? And what happened to his hair…?
- 6. Rolled Steel (1977) Novosteel / Innovative PN Ent Steel (1980) (2003) Winner St l Wi Steel Pacesetter P tt (1997) (1982) Pacesetter Duferco / (1994) Sterling (1991)
- 7. Unique Background q g 1. Rolled Steel Corporation 1. Hands-on product – secondary sales – prime exposure. 2. Innovative Steel 2. Creative processing – HVAC – purchasing. 3. Pacesetter Steel 3. Prime sales - service center, HVAC & OEM. , 4. Duferco / Sterling 4. Management, mill purchasing. 5. 5 Winner Steel & Trading 5. 5 Direct Mill, foreign Mill exposure, international travel, business owner.
- 8.
- 9. STEEL MARKET UPDATE STEEL MARKET UPDATE www.steelmarketupdate.com www steelmarketupdate com Welcome John Packard Volume 4, #52 Monday, May 4, 2009 IN THIS ISSUE: ArcelorMittal Warns of Need to Shutter Capacity in U.S. Market ISM Index Improves to 40.1 Inventory Write-Downs Hurt California Steel & Olympic Steel March Raw Steel Production Quick Note on China Market U.S. Auto Sales Worse than Expected Chrysler Bankruptcy Facts NYMEX Hot Rolled Futures Contracts What to Watch this Week Final Thoughts
- 10. WHY AM IHERE? Student of the steel business
- 11. AISI Mill Shipmentsby end user Service Centers/Processors Construction 29% Automotive 28.7% Energy 15.4% 3% 12.6% 12 6% Containers Exports 9.2% 2.1% Other Other includes non-classified shipments, rail, mining, agricultural, military
- 12. Flat Rolled SteelMarket 1. 1 Construction is 45% of total flat rolled steel market. This includes residential which represents only 5% of the steel used in the construction sector. y 2. Automotive is 15-20% of the flat rolled market with NAFTA producing 14.8+ units/year. p g /y 3. Pipe & Tube is 15% of the flat rolled market 4. All other = 20% of the remaining market
- 13. Mill Shipment Reality 25% Service Centers 10% Toll Processors 65% Direct to OEM's
- 14. “MAY YOU LIVEIN INTERESTING TIMES” Chinese Curse
- 15. Demand Destruction =Missing Pieces of the P le Puzzle We haven’t accepted the changes to the market and we look to the past for help…
- 16. US Housing Starts Seasonally Adjusted Annual Rate Source: US Census 2,500 2005 2,068,000 6 2,000 000 units 1,500 0 1,000 1 000 2008 904,000 2009 New Starts 550M? 500 2000 2001 2002 2003 2004 2005 2006 2007 2008
- 17. 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 1/2000 2,000,000 3/2000 5/2000 7/2000 9/2000 11/2000 1/2001 Source: Ward AutoiInfoBank 3/2001 5/2001 7/2001 9/2001 11/2001 1/2002 3/2002 5/2002 7/2002 9/2002 11/2002 1/2003 3/2003 5/2003 7/2003 9/2003 11/2003 1/2004 3/2004 5/2004 7/2004 9/2004 11/2004 1/2005 3/2005 5/2005 7/2005 9/2005 11/2005 1/2006 3/2006 N. American Auto Production since 2000 5/2006 7/2006 9/2006 11/2006 1/2007 3/2007 5/2007 7/2007 9/2007 11/2007 1/2008 3/2008 5/2008 7/2008 9/2008 11/2008 1/2009
- 18. N. American AutoProduction January 2008 = 2008-2009 1,168,267 1,400,000 1,200,000 1 200 000 1,000,000 800,000 800 000 600,000 400,000 January 2009 = 200,000 435,731 0 Source: Ward AutoiInfoBank
- 19. Axis Title 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 Mar-0 00 Jun-0 00 Sep-0 00 Dec-0 00 Mar-0 01 Jun-0 01 Sep-0 01 Dec-0 01 Mar-0 02 Jun-0 02 Sep-0 02 Dec-0 02 Mar-0 03 Jun-0 03 Sep-0 03 Dec-0 03 Mar-0 04 Jun-0 04 Sep-0 04 Dec-0 04 Mar-0 05 Jun-0 05 2000 2009 2000-2009 Sep-0 05 Dec-0 05 Mar-0 06 Architects Billings Index Jun-0 06 Sep-0 06 construction to Dec-0 06 2009 Commercial decline by 8-15% 8 15% Mar-0 07 Jun-0 07 Sep-0 07 Dec-0 07 Mar-0 08 Jun-0 08 Sep-0 08 Dec-0 08 Mar-0 09 Source: American Insititute for Architects Billings Inquiries
- 20. Carbon - FlatRolled Actual Shipments 2007-2009 2007 2009 Source: Metals Serviice Center Institute 3500 3000 2500 211,800 tons ousand of tons 2000 per day Tho 1500 1000 69,500 tons a day 500 0
- 21. Carbon- Flat Rolled Inventory (EOM) 2007-2009 2007 2009 Source: Metals Service Center Institute 8000 7000 6000 5000 ousand of Tons 4000 4,228,900 228 900 Tho 3000 tons 2000 1000 0
- 22. IN RESPONSE -U S MILLS ARE U.S. TAKING OUT CAPACITY Whether they want to or not…
- 23. North American BlastFurnaces Running (13) ? AK Steel Ashland 1 AK Steel Middletown 0 ArcelorMittal Dofasco 2 ArcelorMittal Burns Harbor 1 ArcelorMittal Cleveland 0 ArcelorMittal Indiana Harbor E 1 ArcelorMittal Indiana Harbor W 0 Essar Essar Algoma 1 Severstal Dearborn 1 Severstal Sparrows Point 1 Severstal Warren 0 US Steel Fairfield 1 US Steel Gary 2 1 US Steel Granite City 0 US Steel Great Lakes 0 US Steel Hamilton 0 US Steel Lake Erie* 0 US Steel Mon Valley 2
- 24. EAF’s running under50% g Running at low 40% SDI & Nucor projecting continued l rates i d low Can h t C shut on & off ff EAF s EAF’s running intermittently with reduced work weeks
- 25. ArcelorMittal Operating Levels East Chicago West 30% East Chicago East 30% Burns Harbor 35% Cleveland 0% Riverdale 18% Coatesville 75% Steelton 80% Conshohocken 35% Weirton 90% Georgetown 0% Source: USW
- 26. WHAT GETS LOSTIS PRICE DISCIPLINE… Can the U.S. mills turn back the tide?
- 27. 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 Apr 00 1300 Jul 00 Oct 00 Jan 01 Apr 01 Jul 01 Oct 01 Jan 02 Apr 02 Jul 02 Oct 02 Jan 03 Apr 03 Jul 03 Oct 03 Jan 04 Apr 04 Jul 04 Oct 04 Jan 05 Apr 05 Jul 05 Oct 05 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Cold Rolled Pricing 2000 2009 2000-2009 Jul 07 Oct 07 Jan 08 Apr 08 Jul 08 Oct 08 Jan-09 Apr-09
- 28. Hot Rolled CoilPricing 2009 540 520 500 480 460 440 420 400 Pricing is based on .060 " X 48" Coil G90, CS/Large Coil
- 29. Galvanized Pricing 2009 680 660 640 620 600 580 560 540 520 500 480 Pricing is based on .060" X 48" Coil G90, CS/Large Coils
- 30. We’re Trying toFigure “it” Out y g g Business has changed! Where are we now and where do we go from here?
- 31. Apparent Steel Consumption pp p 2007 2008 Shipments = 106 430 000 106,430,000 Shipments Shi t = 97,846,000 97 846 000 Imports = 33,244,000 Imports = 31,927,000 Semi’s - 6,656,000 Semi’s - 5,971,000 Finished = 26,588,000 Finished = 25,956,000 Exports = 11,154,000 Exports = 13,476,000 Steel Consumption = 121,864,000 Steel Consumption = 110,326,000
- 32. 2009 Projected SteelConsumption j p Based on World Steel Association projection p j WSA projecting U.S. apparent consumption at 68,000,000 tons for the year (all products) If foreign has 25% of the market = 51 million domestic tons (all products) Historically flat rolled runs about 65% of total at 51 mil = 33.15 million tons. 2000 - 2008 average was = 112,777,000 tons with g , , flat rolled about 73.3 million tons Current run rate @ 43% cap = 52.8 mil tons all products d
- 33. WHAT DO IDO – AND WHAT’S IN IT FOR YOU? Sentiment, Momentum, Real Time Pricing Relevant News & Analysis
- 34. it News N Prices Trends Momentum Missing info
- 35. Steel Buyers Sentiment 100.0 75.0 50.0 25.0 0.0 -65.2 -65 2 -25.0 -50.0 -75.0 -100.0
- 36. Steel Buyers FutureSentiment 100.0 75.0 50.0 25.0 0.0 -25.0 -50.0 -14.8 -75.0 -100.0
- 37.
- 38. SMU Galvanized Index Date Low High g Average g 2/23/2009 $580 $650 $615 3/4/2009 $580 $650 $615 3/9/2009 $570 $655 $610 3/16/2009 $540 $640 $590 3/24/2009 $520 $600 $560 4/1/2009 $520 $600 $560 4/7/2009 $520 $580 $550 4/14/2009 / / 9 $ $520 $ $560 $ $540 4/22/2009 $510 $550 $530 4/29/2009 $500 $540 $520
- 39. Steel Market UpdateIndex Price Comparison as of May 1, 2009 HR CR Galvanized Galvalume Steel Market Update $415 Steel Market Update $415 $490 $490 $510 $510 $669‐$779 $669 $779 CRU $402 $485 $557 NA The Steel Index The Steel Index $410 $410 $499 $499 $567 $567 NA SteelBenchmarker $411 $494 NA NA Platts $ $400 $ $470 NA NA
- 40. Steel Price Calculator Hot Rolled, Cold Rolled, Rolled Galvanized & Galvalume Based on SMU Average Prime Spot Price Indexes
- 42. Some Keys toWatch y MSCI – carbon flat rolled under 2.5 mos Mill capacity utilization at, or above, 60% Reduction in initial jobless claims j AIA Billings Index over 50.0 Oil over $60 barrel $ SMU Buyers Sentiment in + territory SMU Market Momentum SMU Price Indexes stable and then moving higher Housing inventory and foreclosures decreasing g y g Read my newsletter….
- 43. Thank You foryour time as it is truly appreciated