Plate supply exceeds use
By Staff -- Purchasing, 6/1/2000 2:00:00 AM
U.S. use of carbon, alloy and stainless steel plate was about 9.3 million tons last year, down from 11.6 million tons in 1998 and a 10 million ton annual average between 1994 and 1997. Optimistic metals mavens look for plate demand to rise by about 4% this year to 9.7 million tons because of continued strong demand from construction and equipment markets.
However, domestic supply remained in excess last year, even though supply slipped to 10.3 million tons from 13.7 million tons in 1998 and under the annual average of 11.2 million tons in 1994-1997. And, even with anti-import actions limiting offshore supply, the mavens look for supply to rise back to 11.5 million tons because of additional production facilities.
Prices are rising in the torrid stainless market, but carbon and alloy tags remain 8% lower than at the start of 1999. Commodity and specialty plate mills both are pushing 6% spot-market hikes this quarter, which may stick because of the recent reduction in imports and lowering of distribution industry stockpiles. Joseph Cannon, CEO of Geneva Steel, says the $20/ton price increase "is in response to a strengthening in the order book."
However, market analysts and some other plate mill execs worry that new domestic capacity will keep pricing competitive in the market, where two producers already are operating under bankruptcy protection.
Plate products begin as slabs and are processed through the plate mill. Plate slabs are reheated and passed through a series of fast-moving rolls, which make the slabs longer and thinner as they pass through the mill. The plate is finished to the customers specified thickness and then shipped as coil or cut to specified widths and lengths. End users of plate products include manufacturers of storage tanks and pressure vessels, ships and barges, military armor, railway cars, highway and railroad bridges, heavy machinery and machined parts, plus various types of industrial, mining, environmental and construction equipment.
The majority of steel plate is produced and consumed in standard widths and lengths, such as 96 x 240 inches. However, some cut-to-length plate, also called discrete plate, can be as wide as 136 inches.
Specialty steel plate consists of hot-rolled carbon, high-strength low-alloy, alloy and heat-treated steel plate. Specialty steel plate has superior strength and performance characteristics as compared to commodity steel plate and is typically made to order for customers seeking specific properties, such as improved malleability, hardness or abrasion resistance, impact resistance or toughness, higher strength and ease in machining and welding. These improved properties are achieved by chemically refining the steel by either adding or removing specific elements, and by accurate temperature control while hot rolling or heat treating the plate. Specialty steel plate is used to manufacture railroad cars, mobile equipment, bridges and buildings, pressure vessels and machinery components.
Commodity steel plate is used in a variety of applications such as the manufacture of storage tanks, machinery parts, ships and barges, and general load-bearing structures. Coiled plate is the feedstock for the manufacture of ERW (electric-resistance welded) pipe, welded tubing, spiral-welded pipe, and for conversion into cut-to-length plate.
The principal domestic supplier of the specialty plate market is Bethlehem Lukens Plate, a unit of Bethlehem Steel and the largest plate producer in North America since the parent bought Lukens Steel in 1998. Bethlehem operates five plate mills located in Indiana and Pennsylvania, with an estimated annual capacity in excess of 2 million tons. U.S. Steel is the second-largest domestic specialty plate producer, making most of its plate in Indiana, and recently constructed a third heat-treating line to increase its production of normalized plate.
A large domestic supplier of commodity plate is Geneva Steel, which operates an integrated steelmaking facility in Utah (the only blast furnace west of the Mississippi River) that produces approximately 1.1 million tons of commodity plate per year. Although operating under Chapter 11 bankruptcy reorganization, Geneva has made significant capital improvements to its plate-making equipment, including its melt shop, a variable caster and direct hot-rolling machinery. Oregon Steel makes around 800,000 tons annually of specialty and commodity plate in Oregon. It is the only hot-rolled steel plate mini-mill in the eleven western states, and is a specialist in heat-treated (hardened) plate products.
Ipsco of Canada brought into production a greenfield 1.25 million ton/year plate mill in Iowa last decade and is expected to complete construction of a 2.5 million ton/year mill in Alabama in the near future. Also, Nucor is building a 1.3 million ton/yr mill in Hertford County, N.C. Other players include Gulf States Steel, also operating under a Chapter 11 bankruptcy reorganization, and Tuscaloosa Steel, both in Alabama, along with Citisteel in Delaware. Ipsco Steel is adding 2.5 million tons of annual capacity with a 1.25 million ton plate mill running in Montpelier, Iowa, and another that size being built near Mobile, Ala. The former U.S. Steel Texas Works in Baytown, Texas, now operated by U.S. Denro, is working toward full capacity of 900,000 annual tons, and Nucor is building a 1.3 million ton/yr mill in Hertford County, N.C.
The domestic steel plate market saw unprecedented import tonnage levels in 1998 and 1999 from mills in Korea, Japan, Brazil, Canada, Russia and various eastern European countries. In fact, tonnage of imported commodity steel plate for 1999 represented the second-highest year ever recorded, and down only slightly from the record year reported in 1998. Foreign competition also exists for specialty grades with imports from Sweden, European Economic Community, Brazil, Canada, Australia and former Soviet-bloc countries. Two separate government determinations made in 1998 have done little to slow imports:
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The U.S. International Trade Commission found dumping (i.e., sale in the U.S. at less than fair market value) of cut-to-length plate from China, Russia, South Africa and the Ukraine. However, so-called suspension agreements in 1998 have allowed them to ship certain maximum amounts of cut-to-length plate into the U.S. at minimum prices.
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The ITC also ruled that hot-rolled steel plate imported from Brazil, Japan and Russia and cut-to-length steel plate imported from France, India, Indonesia, Italy, Japan and Korea was being dumped. However, after months of discussions with the foreign governments, Uncle is applying most of the punitive tariffs only to shipments made in 2000.
Market sources put domestic mill transaction prices on carbon and hsla plate at $320-$340 a ton and not much different from first-quarter prices. Most import prices are substantially lower. Still, the domestic mills will make another attempt this summer to boost sagging plate prices, as U.S. Steel and Bethlehem Steel have announced $20/ton increases on carbon and high-strength, low-alloy plate, effective for July shipments. These market-leading mills had very limited success with the same $20 increase in April, and buyers actually have reported that smaller-mill market prices have declined since February, when the first of the three commodity plate price hikes announced for this year went on the books.
Supply of heavy steel nosedived in '99/(annual/millions of tons)
| 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 (f) | |
|---|---|---|---|---|---|---|---|---|---|---|---|
Plate/cut |
6.1 |
4.6 |
5.1 |
5.3 |
6.6 |
6.6 |
7.2 |
7.0 |
8.6 |
6.4 |
6.7 |
Plate/coiled |
3.0 |
2.9 |
3.2 |
3.3 |
4.1 |
4.0 |
4.2 |
4.0 |
4.8 |
3.6 |
3.9 |
Plate/stainless |
0.3 |
0.2 |
0.2 |
0.2 |
0.3 |
0.3 |
0.3 |
0.2 |
0.3 |
0.2 |
0.3 |
Structurals/heavy |
6.2 |
6.0 |
5.5 |
5.0 |
4.8 |
5.1 |
5.1 |
4.8 |
5.6 |
4.9 |
5.0 |
Structurals/light |
1.3 |
1.3 |
1.2 |
1.5 |
1.8 |
2.4 |
2.4 |
2.9 |
2.8 |
2.8 |
2.8 |
Piling |
0.5 |
0.5 |
0.5 |
0.5 |
0.5 |
0.6 |
0.5 |
0.4 |
0.5 |
0.5 |
0.4 |
Total |
17.4 |
15.5 |
15.7 |
15.8 |
18.1 |
19.0 |
19.7 |
19.4 |
22.6 |
18.5 |
19.1 |
% change |
4.0 |
-11.0 |
1.4 |
0.7 |
14.6 |
4.7 |
3.8 |
-1.5 |
16.5 |
-18.0 |
3.2 |
SOURCE: PURCHASING |
Supply glut keeps prices low
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